image

Foreign Subsidiaries

Company Registration

Get in Touch

Types of Subsidiaries in India

In the context of Foreign Direct Investment, a subsidiary in India is defined as an entity wherein a parent company from another country has a majority or total stake. The following are the three categories of Subsidiaries in India:

  • Wholly Owned Subsidiary (WOS): An entity wherein 100% of the Share Capital is held by the parent company from another country. This is the most preferred form of Foreign Direct Investment for most MNCs, as it offers the highest degree of control over the entity.
  • Joint Venture (JV): A subsidiary wherein the parent company from another country enters into a partnership with a local entity in India. This form of Foreign Direct Investment is preferred by MNCs to gain access to the existing infrastructure of the Indian entity or to avail of sector-specific FDI norms.
  • Associate Company: An entity wherein the parent company owns more than 20% but less than 50% of the total Share Capital of the entity.

Advantages of Indian Subsidiary Company

Having a subsidiary provides the advantage of "Separate Legal Entity," which gives various advantages:

Direct Market Presence

Unlike a Liaison Office, the subsidiary can do full-fledged business activities in India.

Limited Liability

The liability of the parent company is restricted to only the amount of investment made in the Indian subsidiary. The assets of the parent company remain secure in case of any debt taken by the Indian subsidiary.

FDI Friendly

The Indian Government permits 100% FDI in sectors such as Manufacturing, Software, Services, etc., through the "Automatic Route." No permission is required from the Government in such cases.

Tax Incentives

The subsidiary is considered an Indian company and is hence eligible to enjoy various tax "Make in India" benefits. These include a reduced tax rate of 15% in case of new manufacturing units.

Perpetual Existence

The subsidiary exists even if there is a change in the management of the parent company.

Regulatory Authorities for Indian Subsidiary Company Registration

To navigate the Indian regulatory environment, one has to contend with a number of bodies:

  • Ministry of Corporate Affairs (MCA): The central organization that oversees the incorporation of companies via the Registrar of Companies (ROC).
  • Reserve Bank of India (RBI): Oversees the flow of funds from abroad in accordance with the Foreign Exchange Management Act (FEMA).
  • Income Tax Department: The Income Tax Department is responsible for assigning the Permanent Account Number (PAN) and the Tax Deduction Account Number (TAN).
  • Directorate General of Foreign Trade (DGFT): The DGFT assigns the Import Export Code (IEC), which is required if the subsidiary intends to trade goods internationally.

Requirements and Key Facts about Company Registration in India

Before commencing the process of setup, it is important to ascertain that you fulfill these structural requirements:

  • Minimum Directors: Two directors are required as minimum. However, it is critical to note that at least one of them must be a Resident of India.
  • Shareholders: Two shareholders are required as minimum (in case of a Private Limited Subsidiary). The parent company must hold 99.9%, while 0.1% must be held by a nominee.
  • Registered Office: A physical address in India is required for all correspondence.
  • Authorized Capital: While there is no minimum capital requirement, it is important to note that it must be commensurate with the business needs and must be paid through banking channels.

Procedure for Indian Subsidiary Company Registration

At Ruchi Anand & Associates, We take care of the entire lifecycle of the setup process:

Name Reservation

We reserve your name that aligns with your global brand while keeping in mind the MCA’s name reservation criteria.

Digital Signature (DSC)

We obtain digital signatures for all directors whose names were proposed in the application. If your director is outside India, you need to obtain apostilled documents in your home country.

SPICe+ Integrated Form

We incorporate your company by filing an integrated application form for Incorporation, DIN, PAN, and TAN.

Inward Remittance & FC-GPR

Once your company is incorporated, you need to send in the share capital from your parent company in the foreign country. We help you file your FC-GPR form with the RBI using the FIRMS portal to report your FDI.

Compliance Requirements for Indian Subsidiary Registration

After incorporation, a subsidiary has to comply with very strict laws and regulations in India:

Appointment of First Auditor

To be completed within 30 days of incorporation.

Board Meetings

At least four board meetings to be held every year (quarterly).

Annual Filings

Filing of Financial Statements (AOC-4) and Annual Returns (MGT-7) with ROC.

Statutory Audit

To be conducted for accounts by an Indian Chartered Accountant.

FEMA Compliance

Annual Return on Foreign Liabilities and Assets (FLA) to be filed with RBI.

Taxation of Indian Subsidiary Companies

Indian subsidiaries are subject to the same tax rate as local companies.

  • Corporate Tax: Generally 25% with surcharge and cess, but can be lower for new manufacturing companies.
  • Dividend Distribution: Withholding Tax is applicable on the dividends distributed to the foreign parent company, and the rate can be reduced through the Double Taxation Avoidance Agreement between India and the parent company’s country.
  • Transfer Pricing: If the subsidiary has any dealings with the parent company, like the purchase of services or goods, then the subsidiary has to maintain the documentation of "Arm’s Length."

FDI in Private Limited Company

India’s Foreign Direct Investment Policy is considered one of the most liberal policies in the world.

  • Automatic Route: The majority of sectors permit 100% investment without any prior permission.
  • Government Route: The sectors where prior permission is required are Defense, Print Media, and Satellites.
  • Prohibited Sectors: Foreign Direct Investment is completely prohibited in Gambling, Lottery, and Chit Funds.
FAQ's

FAQs on Process, Requirements & Compliance

Yes, as a Wholly Owned Subsidiary.

No. The process is completely online. Documents can be signed and apostilled abroad.

Yes, as a separate legal entity, it has the right to own and lease property.

If you still have other questions, please visit our Contact Us for get help.

Why Register Your Company through Ruchi Anand & Associates

Ruchi Anand & Associates is a specialist in Cross-Border Consulting. We understand that time is money for a global entity.

  • FEMA Expertise: We don’t just register your company; we ensure your FDI reporting with RBI is perfect to avoid heavy penalties.
  • Resident Director Support: If you don’t have a local partner, we can assist you in appointing a Resident Director as mandated by laws.
  • Strategic Tax Planning: We assist you in availing DTAA benefits to minimize your global tax leakage.
  • One-Stop Shop: We assist you in all your operations in India, including office space, payroll, as well as high-level auditing.
Contact Us Startup in India
We’re Always Available

Message Us