REQUIREMENT OF SETTING UP A BUSINESS IN INDIA BY A FOREIGN COMPANY
- January 14, 2016
- Posted by: Indirect Tax Professionals
- Category: Articles
SETTING UP A BUSINESS IN INDIA – ENTRY STRATEGIES FOR FOREIGN INVESTORS
|A foreign company planning to set up business operations in India has the following options:|
|1. AS AN INDIAN COMPANY|
|A foreign company can commence operations in India by incorporating a company under the Companies Act, 1956 through:
Foreign equity in such Indian companies can be up to 100% depending on the requirements of the investor, subject to equity caps in respect of the area of activities under the Foreign Direct Investment (FDI) policy. Details of the FDI policy, sectoral equity caps & procedures can be obtained from Department of Industrial Policy & Promotion, Government of India. We can also help you out in the complete process. Contact us for the specific request.
|1. a) Joint Venture With An Indian Partner||Foreign Companies can set up their operations in India by forging strategic alliances with Indian partners.
Joint Venture may entail the following advantages for a foreign investor:
|1. b) Wholly Owned Subsidiary Company||Foreign companies can also set up wholly owned subsidiary in sectors where 100% foreign direct investment is permitted under the FDI policy.|
|Incorporation of Company||For registration and incorporation, set of applications have to be filed with Registrar of Companies (ROC). Once a company has been duly registered and incorporated as an Indian company, it is subject to Indian laws and regulations as applicable to other domestic Indian companies.
You can also Contact us for the company formation.
|2. AS A FOREIGN COMPANY|
|Foreign Companies can set up their operations in India through:
Such offices can undertake any permitted activities. Companies have to register themselves with Registrar of Companies (ROC) within 30 days of setting up a place of business in India.
|2. a) Liaison Office/ Representative Office||Liaison office acts as a channel of communication between the principal place of business or head office and entities in India. Liaison office cannot undertake any commercial activity directly or indirectly and cannot, therefore, earn any income in India. Its role is limited to collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers. It can promote export/import from/to India and also facilitate technical/financial collaboration between parent company and companies in India.
Approval for establishing a liaison office in India is granted by Reserve Bank of India (RBI).
|2. b) Project Office||Foreign Companies planning to execute specific projects in India can set up temporary project/site offices in India. RBI has now granted general permission to foreign entities to establish Project Offices subject to specified conditions. Such offices cannot undertake or carry on any activity other than the activity relating and incidental to execution of the project. Project Offices may remit outside India the surplus of the project on its completion, general permission for which has been granted by the RBI.|
|2. c) Branch Office||Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up Branch Offices in India for the following purposes:
A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer. Branch Offices established with the approval of RBI, may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines Permission for setting up branch offices is granted by the Reserve Bank of India (RBI).
FOREIGN DIRECT INVESTMENT (FDI) POLICY
FDI under automatic route is now allowed in all sectors, including the services sector, except a few sectors where the existing and notified sectoral policy does not permit FDI beyond a ceiling.
No prior approval is required for FDI under the Automatic Route. Only information to the RBI within 30days of inward remittances or issue of shares to Non Residents is required.
|Foreign Investment proposed not covered under the ‘Automatic Route’ are considered for Governmental Approval on the recommendations of the Foreign Investment Promotion Board (FIPB)|
TAXATION IN INDIA
India is moving towards reforming its tax policies and systems so as to facilitate globalization of economic activities. The net tax rate is far lower than this on account of various deductions and exemptions available under the tax laws. Tax holidays are available in Special Economic Zones set up to make industry globally competitive. Infrastructure Sector Projects enjoy special tax treatment/holidays. A user friendly tax administration is being introduced with round the clock electronic filing of customs documents from 31.3.04. Further, the shift towards GST (Goods and Service Tax) would also be a major reformation in the Indian Taxation history.