Repatriable
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Repatriable is a definition that presents something as capable of repatriation. Repatriation globally mean that we can bring something that was acquired in a foreign country or was taken there to the country of origin. Generally, in finance, repatriation refers to currency. The main goal of this is to change a foreign currency into that one local currency that we are using currently. It becomes necessary, when we have to make investments in the foreign countries, travelling through the world or just by making business transaction with our contractors.
When considering assets as repatriable, we can tell that those are the assets, that can be withdrawn from other country (foreign) and stored in our home country. Also if we are talking about the currency here, the deposited amount will be transferred from foreign currency, to the home currency that we are using.
Speaking of something that it is repatriable, we have to make sure, that both of the countries that repatriation refers to, have the laws constructed in a way, that those will not limit the possibility of repatriation. If one of the countries have laws that will impede or limit the possibility of this process, the repatriation can be stretched in time or even can be not possible to achieve.
Other definitions says that repatriation refers to anyone or anything which returns to their place of descent.
Laws impact
When we speak of repatriation, the main issue with limit to this is law. Laws can spur or block process of repatriation. Some countries have bigger possibility to proceed with repatriation, we can easily locate our funds there or make big investment within its borders. Some, on the other hand have the hermetical borders when coming to their currency or the investments people can make there are really restricted. This can block the repatriation. One of the main problems when considering this process are taxes. Some of the countries implement taxes to the income or assets of the income that was earned in the foreign countries. We have a good example of this actions in United States of America. Income earned abroad is reduced by Foreign Tax Credit. That process made many of the companies abroad and place their investments in the foreign countries in order to avoid the taxes. This process discourages investors from moving their business to the home country because abroad they can save more of the income.
Exchange risk
Big companies mostly works in few countries at the same time. This in some measure forces them to operate the currency of the country they placed their company in. And this situation makes a so-called foreign exchange risk. The funds company holds are exposed to the fluctuations of the exchange rate, which makes that the company can gain or lose value. We can put an example here, when one of the companies from America would like to sell their products in their stores in one of European countries, like Germany, they would have to sell those products in the currency that is currently used in the borders of Germany, which is euro. So the gain of the company will be mostly based on the fluctuations of the value of both of the currencies. This company can earn more when the dollar will be stronger, and during its selling, one dollar will cost more euro than in the beginning of the sell. But at the same time it can loose, as the dollar can cost less euro than originally started. This is, what makes the risk of exchange.
NRE and FCNR-B accounts
India has came out with an initiative called FDI (foreign direct investment) that will encourage the cash (assets) and investment flow into India especially from their citizens that work in the foreign countries. This create exclusive accounts for non Indian residents (NRI). Those accounts can be both repatriable or non-repatriable. There is a possibility for NRI to choose between two types of the accounts:
- First one is the NRE account (Non resident external account).
- Second type of the account the NRI can use is the FCNR-B account (Foreign currency, non-resident bank deposit).
The funds that are generated on those accounts can be repatriated by for example converting them into any foreign currency or transferring to the country the resident is currently in. There is also a third type of the account, NRO Account. This is a non-repatriable account. The funds there are stored in Rupees and those cannot be transferred to ay other country and cannot be change to other currencies. In order to activate NRI account in India, account holder has to provide the documentary that he is nonresident as for this moment regarding Indian tax laws. When the person becomes NRI, he is unable to have any other bank accounts with Indian resident status.
We also have to keep in mind the fact that assets as cash are repatriable. But on the other hand assets as real estate cannot be. In fact, if something is repatriable mostly depends on the country and laws that describes this process.
References
- Altshuler R.,GrubertH., (2003), “Repatriation Taxes, Repatriation Strategies and Multinational Financial Policy”, Journal of Public Economics, 87, 73–107
- Frieden J. A., (2016), “Currency Politics. The Political Economy of Exchange Rate Policy”, Princeton
- Gordon J., Gupta. P, (2004), Nonresident Deposits in India: In Search of Return?, International Monetary Fund
- Levin, C. and T. Coburn (2011), Repatriating Offshore Funds: 2004 Tax Windfall for Select Multinationals, United States Senate Permanent Subcommittee on Investigations
- Nikolaeva, T., (2010), The Challenges of Expatriation & Repatriation, AArhus University
Author: Paulina Pisarek
