Technology Transfer Remittances Allowed without Limit by RBI w.e.f 16.12.2009

No Central Government Permission Required Remittance under Automatic Approval

[RBI Circular No. 52 dated 13th May 2010]

Sub: Foreign Exchange Management Act (FEMA), 1999 - Current Account Transactions Liberalisation

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to Foreign Exchange Management (Current Account Transactions) Rules, 2000 notified vide Notification No.G.S.R.381(E) dated 3rd May 2000, as amended from time to time.

2. In terms of Rule 4 of the Foreign Exchange Management (Current Account Transactions) Rules 2000, prior approval of the Ministry of Commerce and Industry, Government of India, is required for drawing foreign exchange for remittances under technical collaboration agreements where payment of royalty exceeds 5% on local sales and 8% on exports and lump-sum payment exceeds USD 2 million [item 8 of Schedule II to the Foreign Exchange Management (Current Account Transactions) Rules, 2000]. The Government of India has reviewed the extant policy with regard to liberalization of foreign technology agreement and it was decided to omit item number 8 of Schedule II to the Foreign Exchange Management (Current Account Transaction) Rules, 2000, and the entry relating thereto.

3. Accordingly, AD Category-I banks may permit drawal of foreign exchange by persons for payment of royalty and lump-sum payment under technical collaboration agreements without the approval of Ministry of Commerce and Industry, Government of India.

4. The amendment to the Foreign Exchange Management (Current Account Transactions) Rules, 2000, in this regard has been notified by the Government of India vide Notification No.G.S.R.382 (E) dated May 5, 2010 (copy enclosed).

5. AD Category-I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

6. The directions contained in this Circular have been issued under Section 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions / approvals, if any, required under any other law.

Ministry of Finance

(Department of Economic Affairs)

Notification

New Delhi, the 5th May 2010

Sub: Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2010

In exercise of the powers conferred by Section 5 and sub-section (1) and clause (a) of sub-section (2) of Section 46 of the Foreign Exchange Management Act, 1999 (42 of 1999) and in consultation with the Reserve Bank, the Central Government, having considered it necessary in the public interest, hereby makes the following further amendment in the Foreign Exchange Management (Current Account Transactions) Rules, 2000, namely:-

1. (1) These rules may be called the Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2010.

(2) They shall be deemed to have come into force with effect from the 16th day of December, 2009.

2. In the Foreign Exchange Management (Current Account Transactions) Rules, 2000, in Schedule II, item number 8 and the entry relating thereto shall be omitted.

[F.No. 1/1/EC/2004]

Explanatory Memorandum:- The Government of India reviewed the extant policy with regard to liberalization of foreign technology agreement and it was decided to permit, with immediate effect, payments for royalty, lump sum fee for transfer of technology and payments for use of trademark/brand name on the automatic route. Accordingly, Government of India issued a Press Note on 16.12.2009. Hence, the rule shall be deemed to have come into force with retrospective effect, i.e., from 16.12.2009.

1. It is certified that no person will be adversely affected by giving retrospective effect to these rules.

Government of India

Ministry of Commerce & Industry

Department of Industrial Policy & Promotion

(FC Section)

Press Note No.8 (2009 Series)

Subject: Liberalization of Foreign Technology Agreement policy

The existing policy of Government of India on the payment of royalties under Foreign Technology Collaboration provides for automatic approval for foreign technology transfers involving payment of lumpsum fee of US$ 2 million and payment of royalty of 5% on domestic sales and 8% on exports. In addition, where there is no technology transfer involved, royalty up to 2% for exports and 1% for domestic sales is allowed under automatic route on use of trademarks and brand names of the foreign collaborator. Separate norms are available for the hotel sector vide Press Note 18 (1991 Series) and Press Note 1 (1995 Series). Technology transfers involving payments above these limits required prior permission of the Government of India (Project Approval Board, Department of Industrial Policy and Promotion).

2. The Government of India has reviewed the extant policy and it has been decided to permit, with immediate effect, payments for royalty, lumpsum fee for transfer of technology and payments for use of trademark/brand name on the automatic route i.e. without any approval of the Government of India. All such payments will be subject to Foreign Exchange Management (Current Account Transactions) Rules, 2000 as amended from time to time.

3. A suitable post-reporting system for technology transfer/ collaborations and use of trade mark/ brand name will be notified by the Government separately.

4. These guidelines issue in modification of provisions relating to foreign technology proposals/approvals contained in paragraph 3 of Press Note 10 (1991), para 7 of Press Note 11 (1991), para 4 & 5 (a) of Press Note 12 (1991), para 2-6 of Press Note 20 (1991), para 2 of Press Note 5 (1992), para 4 of Press Note 4 (1994), para 3 of Press Note 18 (1997) and paragraphs III and IV of Press Note 9 (2000). These guidelines will issue in supersession of provisions of Press Note 18 (1991), Press Note 4 (1992), Press Note 1 (1995), Press Note 4 (1996), Press Note 1 (2002) and Press Note 2 (2003).

Foreign Exchange Management (Current Account Transactions) Rules, 2000

Deleted Entry

8.

Remittances under technical collaboration agreements where payment of royalty exceeds 5 percent on local sales and 8 percent on exports and lump-sum payment US $2 million

Ministry of Industry and Commerce