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ODI · FEMA · Form FC · APR

Funding a Spanish subsidiary from India: the ODI rules that gate the whole thing.

You cannot simply wire money from India to a Spanish company you own. Every rupee that leaves runs through the overseas investment framework, an authorised dealer bank and a form filed before the transfer. Get the sequence wrong and the block falls on the money coming back.

The sequence ↗ Rules, forms, limits and the annual filing that unblocks dividends
Automatic route ceiling
400%
Of the Indian company's net worth, across all overseas commitments.
Individual founders
$250k
Per financial year under the Liberalised Remittance Scheme.
Annual filing
31 Dec
Miss it and your bank stops outward remittances — and dividends home.
The short answer

How does an Indian company fund a Spanish subsidiary?

Through the Overseas Direct Investment framework. Since the Spanish company is unlisted, subscribing for its shares is ODI by definition. You file Form FC through an authorised dealer bank at the time of the financial commitment or the first remittance, whichever is earlier; the bank obtains a UIN for the Spanish entity from the Reserve Bank; and you then file an Annual Performance Report for that entity every year by 31 December, indefinitely.

The current framework dates from 22 August 2022, when the Overseas Investment Rules, Regulations and Directions replaced a structure that had been in place since 2004. It is more permissive than what it replaced on several points, and considerably more demanding on reporting.

How the money actually moves
Indian company AD Bank Form FC filed here UIN obtained from RBI Spanish SL share capital paid in out out dividends dividends APR by 31 December every year, per entity Miss it and the bank blocks both arrows — including dividends. INDIA SPAIN
The point people miss. The annual report is not a formality attached to money going out. A non-filing flag sits on the entity record and stops the bank processing remittances in either direction, so the first casualty is usually a dividend the Indian parent was counting on.

ODI or OPI — and why yours is always ODI.

ODI

Direct investment

Acquiring unlisted equity capital of a foreign entity, subscribing to its constitutional documents, holding 10% or more of a listed foreign entity, or any investment conferring control even below 10%.

OPI

Portfolio investment

Everything else in foreign securities. Lighter reporting, but it excludes unlisted debt, derivatives and commodities.

No election available

A Spanish SL is unlisted, so subscribing for its shares is ODI.

There is no threshold to stay under and no lighter-touch alternative. And the classification is sticky: once an investment qualifies as ODI it continues to be treated as ODI even if the stake later falls below 10%. You do not drift out of the regime by dilution.

The sequence, and what blocks what.

Order of operations
Before
Check you are eligible to remit at allAn NPA account, wilful defaulter classification or an open investigation requires a no-objection certificate first. If the authority does not respond within 60 days, no objection is presumed.
Before
Test the structureBona fide business activity, permissible under both Indian and Spanish law. No more than two layers of subsidiaries. Not a financial services activity if you are remitting as an individual.
At the moment
File Form FC through your AD bankAt the time of the financial commitment or the first outward remittance, whichever is earlier. The bank obtains the UIN for the Spanish entity from the Reserve Bank.
Then, forever
APR by 31 December, every yearOne per foreign entity, for as long as you hold it. Late filing is a FEMA contravention carrying a late submission fee.

Note the third step carefully. The trigger is the financial commitment, not the transfer — so signing a binding subscription or issuing a guarantee starts the clock even if no money has moved. Founders who plan to "file once the bank account is open" have often already missed it.

How much you may send.

Who is investingRouteCeilingRestrictions
Indian companyODI, automatic route400% of net worthAcross all overseas financial commitments, not per entity
Resident individualLRSUSD 250,000 per financial yearOperating entities only. Financial services excluded
Above the ceilingApproval routeCase by caseReserve Bank approval through the AD bank

Financial commitment is wider than cash. It captures equity subscription, loans to the foreign entity and guarantees issued on its behalf. A parent guarantee given to a Spanish bank or landlord consumes headroom under the 400% limit exactly as a cash transfer does, which is the most commonly overlooked element of the calculation.

What counts towards the 400% ceiling
Equity subscribed in the Spanish SLCounts in full
Loans advanced to the Spanish SLCounts in full
Guarantees issued on its behalfCounts — and is usually forgotten
The ceiling applies to total financial commitment across every overseas entity you hold, not to the Spanish one alone. A group with existing subsidiaries elsewhere may have far less headroom than the headline percentage suggests.

Two layers, and the round-tripping rule.

The 2022 framework did something the previous regime did not: it permitted round-tripping for genuine transactions, within a limit.

Now permitted

A foreign entity that holds Indian assets

You may make a financial commitment in a foreign entity that has itself invested into India, where the transaction is genuine — provided the resulting structure does not exceed two layers of subsidiaries.

Still blocked

Anything deeper

Structures running beyond two layers are outside the rules regardless of commercial rationale. The layer count is measured through the chain, so an intermediate holding company in a third country uses up one of the two.

For a straightforward India-to-Spain operating subsidiary none of this bites. It becomes live the moment someone proposes a Dutch or Luxembourg holding company between the two, which uses a layer and needs checking before it is incorporated rather than after.

The annual report, and why it is the real risk.

The consequence chain

A missed APR blocks the money coming home.

Non-filing by 31 December is a contravention of FEMA attracting a late submission fee. But the operational consequence arrives first and hurts more: your authorised dealer bank places a flag on the ODI record, and refuses further outward remittances and new financial commitments until it is cleared — a category that in practice includes routine dividend repatriation from the Spanish company back to India.

So the filing that looks like housekeeping for money going out is actually the gate on money coming in. Companies discover this when a board has already approved a distribution.

What the APR needs, and why it starts in October
  • Audited financial statements of the Spanish entity. Spanish accounts run on a statutory timetable of their own; ask the Spanish accountant in the autumn, not in December.
  • One report per foreign entity, every year, for as long as the holding exists. Not one per group.
  • Certification in the prescribed manner through the AD bank.
  • Consistency with Form FC and with any subsequent commitments. Mismatches generate queries that take longer than the filing.

Where the Indian and Spanish sequences meet.

The two sides have to be run together, because each has a step the other one waits on.

Spain
NIE for the individuals involvedDirectors and shareholders who are individuals need Spanish identification numbers before the incorporation deed can be signed. This is usually the longest lead time on the Spanish side.
Spain
Company incorporated, share capital subscribedThe capital has to be paid in, which is the moment the Indian money must actually arrive.
India
Form FC filed, UIN issuedBefore or at the first remittance. Filing after the capital has already moved is a contravention, not a correction.
Spain
Tax registration, activity codes, bank accountThe Spanish company's own compliance begins, independently of anything in India.
Both
First financial year closesSpanish accounts and corporate filings, then the Indian APR by 31 December that depends on them.
Getting the NIE ↗ PE risk before you incorporate ↗ Forming the Spanish SL ↗

What goes wrong.

Recurring failures
Most common
Filing after the money movedThe trigger is the commitment or the first remittance, whichever is earlier. Retrospective filing is a contravention.
Most expensive
Missed APRDividends blocked until cleared, plus a late submission fee, plus a record that follows the entity.
Miscalculated
Guarantees ignoredA parent guarantee to a Spanish landlord or bank consumes the 400% headroom like cash does.
Structural
A holding company added laterAn intermediate entity uses one of the two permitted layers. Check before incorporating it.
Individual founders
LRS used for the wrong thingFinancial services activity is excluded, and the annual limit covers all personal remittances, not just this one.
Avoidable
Spanish accounts requested in DecemberThe APR depends on them. The Spanish timetable does not adjust to the Indian deadline.
Where this becomes a decision

The two timetables have to be planned as one.

We handle the Spanish side — NIE, incorporation, capital, tax registration and the annual accounts your APR depends on — and sequence it against what your AD bank needs, so the filing happens before the remittance rather than after it.

Book a consultation ↗
Terms you will meet
ODI
Overseas Direct Investment. Unlisted foreign equity, 10% or more of a listed entity, or any stake conferring control.
OPI
Overseas Portfolio Investment. Foreign securities that are not ODI.
FEMA
The Foreign Exchange Management Act, under which the overseas investment framework sits.
AD bank
Authorised dealer bank. Every filing and remittance routes through it; it is the gatekeeper, not a messenger.
Form FC
The financial commitment form, filed at commitment or first remittance, whichever is earlier.
UIN
Unique Identification Number issued by the Reserve Bank for the foreign entity, obtained by the AD bank.
APR
Annual Performance Report. Due by 31 December each year, one per foreign entity.
LSF
Late Submission Fee, payable where a filing misses its deadline.
LRS
Liberalised Remittance Scheme. USD 250,000 per financial year for a resident individual.
Financial commitment
Equity, loans and guarantees taken together — the measure against the 400% ceiling.
Frequently asked
Can an Indian company just transfer money to its Spanish subsidiary?
No. The remittance runs through the overseas investment framework and an authorised dealer bank, and Form FC must be filed at the time of the financial commitment or the first outward remittance, whichever is earlier. The bank obtains a Unique Identification Number for the Spanish entity from the Reserve Bank. A transfer made without this is a contravention of FEMA rather than a paperwork delay.
Is investing in a Spanish SL ODI or OPI?
ODI, always. A Spanish SL is an unlisted company, and acquiring unlisted foreign equity capital is ODI by definition, with no threshold to fall below. The classification is also sticky: an investment that qualifies as ODI continues to be treated as ODI even if the stake later drops below 10%.
How much can an Indian company invest abroad?
Under the automatic route, total financial commitment across all overseas entities may not exceed 400% of the Indian company's net worth. Financial commitment includes equity, loans to the foreign entity and guarantees issued on its behalf — guarantees are the element most often left out of the calculation. Beyond the ceiling, Reserve Bank approval is needed through the AD bank.
Can an individual founder fund a Spanish company from India?
Yes, under the Liberalised Remittance Scheme, up to USD 250,000 per financial year. Two conditions matter: the foreign entity must be engaged in bona fide operating activity, and financial services activity is excluded. The limit covers all your remittances under the scheme in that year, not just this investment.
What is the Annual Performance Report and when is it due?
A yearly report on each foreign entity you hold, filed through the AD bank by 31 December. It relies on the Spanish company's financial statements, which is why the work should start in the autumn rather than in December. It continues for as long as the holding exists.
What happens if I miss the APR deadline?
It is a contravention of FEMA attracting a late submission fee, but the operational consequence lands first: the AD bank flags the record and stops further outward remittances and new financial commitments until it is cleared. In practice that includes dividend repatriation from Spain back to India, so the missed filing blocks money coming home rather than only money going out.
Can I put a holding company between India and Spain?
Possibly, but check before incorporating it. The framework permits structures of no more than two layers of subsidiaries, and an intermediate holding company in a third country consumes one of those layers. Round-tripping — a foreign entity that itself holds Indian assets — is permitted for genuine transactions within the same two-layer limit, which is a liberalisation on the previous regime.
Do I need a no-objection certificate?
Only in defined circumstances: where you have an account classified as a non-performing asset, are classified as a wilful defaulter, or are under investigation by a financial sector regulator or investigative agency. In those cases a no-objection certificate is required from the lender, regulator or agency before making the financial commitment. If the authority does not respond within 60 days of the application, no objection is presumed.
How are dividends from Spain taxed when they reach India?
Spain may withhold at source subject to the treaty cap, and India taxes the dividend in the hands of the Indian company with credit for the Spanish tax. That is the tax analysis. Separately and independently, the remittance itself will not clear the AD bank if your ODI filings are not current — the two questions are unrelated in law and inseparable in practice.
Does ODI compliance affect my Spanish tax position?
No. The overseas investment framework is Indian exchange control; it governs whether money may leave India and what you must report to the Reserve Bank. Spanish corporate tax, permanent establishment exposure and Spanish filing obligations are decided entirely under Spanish law and the treaty. Both sets of obligations run in parallel and neither excuses the other.
Based on the Foreign Exchange Management (Overseas Investment) Rules, Regulations and Directions, 2022, notified on 22 August 2022, as in force at September 2026. Thresholds, forms and deadlines are summarised for orientation; the framework contains conditions and exceptions not covered here, and your authorised dealer bank applies it with its own documentation requirements. This describes Indian exchange control, not Indian or Spanish tax. General information, not legal or financial advice — take advice on your own facts before remitting.
Continue reading

India and Spain.

Guide 01
PE risk in SpainThe 1993 treaty creates a PE faster than the model, and reaches further.
Read guide ↗
Guide 02
The India–Spain treatyRates, articles and how taxing rights are allocated.
Read guide ↗
Guide 03
Business entry for Indian companiesStructure, formation and the practical sequence.
Read guide ↗

File before you remit. Not after.

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About the author
AB

Alexander Baranov

Founder, Voixa Consultors · International corporate structuring since 2008

Seventeen years designing and delivering cross-border corporate structures — incorporation, tax, holding, banking and market entry — for founders and companies expanding into Spain and the EU. Author of professional books on entering the Spanish market.

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Market Entry to Spain Strategy, corporate structure, tax and growth — the long-form treatment of the decisions covered here.
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