Foreign Subsidiary

Foreign Subsidiary Registration in India

Any company that is owned by a foreign company is known as an Indian Subsidiary. Many foreign companies want to start operating in India as India is one of the largest and fast-growing markets. Foreign Direct Investment (FDI) is allowed in almost all industries in India such as e-commerce, retail, real estate, hospitality, manufacturing, education, software and Information technology, energy etc

India has recently abolished Foreign Investment Policy Board (“FIPB”) – an FDI regulator which was in charge for processing and recommending FDI applications. Now almost all FDI would be processed via an automatic route which very investor friendly and faster.

The government has also allowed start-ups to issue convertible notes to non-residents under the FDI regime. Foreign companies investing in India, come and stay here due to liberal FDI and capital and profit reparation law

A foreign investor can invest India via 2 FDI routes, ie automatic and approval. The automatic route is allowed almost in all sectors of the economy. In this case, you are not required to seek permission from Reserve Bank of India (RBI) and Department of Industrial Policy Promotion (DIPP) to bring capital into India. You are just required to report to the regional RBI office within 30 days after the investment is made.

Government approval route is meant to regulate FDI flows in priority sectors. All print media, aviation, defense, food retailing, content broadcasting (FM radio) etc fall under this category.

Options available for setting up your offshore business in India

Subsidiary company: It is a company incorporated in India with all or majority of its shares held by the foreign parent company.

Branch office: As the name suggests a Branch office will act as a branch of your existing company. It’s a very good option if your are testing waters in India.

Liasion office: A foreign company can set up a Liaison or communication office for facilitating the flow of information between head office and Indian companies and organizations. Often liaison offices are set up to run product awareness or brand building campaign for the parent organization or to execute a short duration project.

A local director who is resident in India is mandatory for forming a subsidiary. Not to worry if you don’t have a local connect – you can choose a resident director from our empanelment of screened nominee directors.

Any document from the foreigner director’s and parent company to be submitted in India has to be legalized or apostilled at your home country. We can help you with the apostille process as well through our partners across the globe.

Documents Required from Indian Resident Director

• Copy of PAN
• Copy of Aadhar Card or Driver’s License or Passport or Voter’s ID
• Address Proof – Latest Bank Statement or Telephone or Mobile Bill (not older than 2 months)
• Passport Size photograph in JPEG format.

Documents Required from Foreign Promoter

• Copy of Passport
• Copy of Driving License ( if passport doesn’t have the address)
• Latest Bank Statement or Telephone or Mobile Bill (not older than 2 months)
• Passport Size photograph in JPEG format.

Documents Required from Foreign Company

• Company Incorporation Certificate
• Copy of MOA and AOA
• Board resolution ( we will prepare)

Process:

• Filing company name application (The name approval is going to be the most time consuming process if you do not have an unique name to your business. Registrar of companies may reject the names which are similar to existing name phonetically or in spelling. You may get a rejection if there are resembling trademarks or the name applied is generic in nature.)
• Applying digital signature certificate for the director’s and shareholder’s
• Preparing Memorandum (main objects of company, capital – shareholding pattern are covered in MoA) and Article of associations (bye laws for the operation of the business are covered in AoA). We will draft the Memorandum or Articles of association and share with you for the review of your legal team. These documents will require apostille in the home country before submitting them to Registrar of companies.
• Filing incorporation forms with MCA (Filing apostilled MoA, AoA, updating registered office of the company and paying government fees and stamp duty is the third and last step in the process. After the Registrar of Companies (RoC) finds that you have complied with all norms, Certificate of Incorporation is sent via email)
• Obtaining certification of incorporation, PAN and TAN.

Post Incorporation Compliances:

Company Bank Account

Once the company is formed, we will assist you to open a current account with any nationalised banks in India. There are few banks which allows opening of an account remotely. However, most of them will require the foreign director to fly down for the KYC process. You can bring in the initial equity capital contribution to the bank once the account is opened and operational.

Share Allotment

The shares should be allotted to the subscribers within 2 months from the date of incorporation of the subsidiary company.

Reserve Bank of India reporting

The central bank of India, will require you to file an intimation of receipt of foreign investment into the company within 30 days of receipt of equity capital to the company. The form used for this is called Advance Reporting Form (ARF). The Reserve Bank will allot you an Unique Identification Number (UIN) if it is satisfactory with the investment you brought in. Once the share certificates are issued, another set of intimations has to be initiated with Reserve Bank – called Foreign Currency General Permission Route aka FC-GPR reporting.

Tax

Corporate tax: It is the Income tax on profits of a Subsidiary Company. Corporate taxes on profits in India are 40%, upto INR 10 million turnover. Profit making companies requires to pay advance corporate tax on a quarterly basis as well.

Dividend Distribution Tax: A company is subjected to dividend distribution tax (DDT) as well when it pays dividend to its shareholders. Under the Income Tax Act, DDT is charged at the rate of 16%.

Good and Services Tax (GST): Any business dealing in purchase and sales of goods and services in India comes under purview of Indirect Taxation. You have to enrol for GST as and when you reaches the turnover thresholds.

Audit and Compliance

Statutory Audit and maintenance of books of accounts is mandatory if you are running a private limited company. You have to appoint a statutory auditor once you incorporate your private limited company. Annual reporting of financial position and operations of the company to Registrar of companies and Income Tax department is mandatory. All Indian companies that have received FDI or made overseas direct investment have to file an annual return with Reserve Bank of India as well.