Some business entities in India with which we are negotiating to enter into a joint venture for setting up a manufacturing unit in Spain would like to know whether they have to take Reserve Bank of India’s permission for opening a foreign currency account in Spain for remittance of rupee funds into that account. Please enlighten.
S K Bijlani, Dubai
Prior to April 2012, an Indian party which was eligible to undertake overseas direct investments had to obtain prior permission of the Reserve Bank of India to open and maintain foreign currency account in a foreign country for the purposes of overseas direct investments in that country. With effect from April 2012, no prior permission from RBI is necessary where the foreign currency account is opened, held and maintained as per the regulations of the country in which the foreign direct investment is to be made.
This is subject to the further condition that the remittances deposited in the foreign currency account by the Indian party are utilised solely and exclusively for making overseas direct investment in the foreign joint venture. Further, any amount deposited in this account by way of dividend from the overseas joint venture should be repatriated to India within thirty days from the date of credit.
The Indian party is required to submit details of debits and credits in the foreign currency account every year to the designated bank alongwith a certificate from the statutory auditors of the Indian party certifying that the foreign currency account has been maintained as per the laws and regulations of the host country as well as the Foreign Exchange Management Act.
The writer is a practicing lawyer, specializing in tax and exchange management laws of India.
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