Subsidiary in India

Subsidiary in India

In today’s world it is considerably easier to setup or start a company in India. Now a days it needs lesser time frame to start your business in India compared to yester years. It takes only less that 5 weeks to register a company in any part of India. With the digitalization of company registration process the time consumed for company registration have come down dramatically.

Before anyone is planning to start a business in India the business owner must decide up on which type of business it should be. In general there are two types of business entities like private limited companies and public limited companies. Other than these common business entities there are other types which are based on the particular needs of the business owners.

Our team of experts can provide all the assistance in starting a business in India. With the experience we gained from several years with hundreds of clients who have started their successful business ventures in all parts of India, we can assure you the best services at the most competitive rates. Our business consulting services spans from the starting of a company or business till that business becomes a successful enterprise in India.

Legal and various types of document works are involved in starting a business in India other than approvals from Government of India. We can assist you in registering your company in India along with getting vital documents and approvals from the government

LIAISON OFFICE:

A liaison office is the most basic form of business presence that a foreign company can have in India. Permission to open a liaison office in India is granted by RBI, the apex exchange control authority. Liaison offices are normally established by foreign companies to promote their business interests by spreading awareness of their product(s) and exploring opportunities for business and investment in India. Foreign insurance companies have a general permission to establish a liaison office in India provided they have obtained permission from the Insurance Regulatory Development Authority of India and they comply with certain prescribed conditions.

Scope of activities

Under the current exchange control regulations, a liaison office is permitted to:

  • Represent the parent/group companies in India;
  • Promote exports and imports from/to India;
  • Promote technical /financial collaborations between parent/group companies and companies in India ;
  • Act as a communication channel between parent/group companies and companies in India.

Typically, a liaison office is not permitted to :

  • Earn any income;
  • Undertake any industrial, trading or commercial activity;
  • Enter into any agreement on behalf of the head office;
  • Borrow or lend money for any commercial activity;
  • Charge any fee or commission or otherwise earn any income, in respect of liaison activities carried on in India.

Approval process

An application in the prescribed form has to be submitted to RBI for establishing a liaison office in India. The lead time for processing a liaison office approval typically ranges from three to four weeks, unless the application is referred to the administrative ministry concerned within the Government of India for its comments, which may lead to an increase in the processing time.

Remittance facilities

As stated above, a liaison office cannot earn any income in India (except for interest on surplus funds lying in its local bank account subject to certain conditions). Therefore, all expenses of the liaison office have to be met out of inward remittances from the head office. Any balance in the liaison office account can typically be repatriated, only at the time of closure of the liaison office.

Taxation

As stated above, liaison offices are not permitted to carry on any industrial, trading or commercial activities, nor to earn any income in India. However, sec 139(1) requires all companies to furnish a return of income. Hence, liaison offices would also be required to file their return of income in India.

Exit options

Closure of a liaison office normally involves a time frame of five to six weeks. An application enclosing the prescribed documentation is required to be made to the requisite regional office of RBI.

PROJECT OFFICE:

In case a foreign company wishes to establish a business presence in India for the limited purpose of executing a project, it may establish a project office for its Indian operations. The objective behind establishment of a project office is to enable a foreign company to establish a temporary base in India for executing specific projects/contracts.

A foreign company may open a project office in India for executing a contract secured by an Indian company without the prior permission of RBI provided the following conditions are satisfied:

  • The project is funded directly by inward remittance from abroad;
  • The project is funded by a bilateral or multilateral international Financing Agency;
  • The project has been cleared by an appropriate authority;
  • A company or entity in India awarding the contract has been granted term loan by a public financial institution or a bank in India for the project.

In all other cases, prior approval of the RBI is required to establish a project office in India.

Remittance facilities

A project office is permitted to open and operate a bank account including a foreign currency account in India. Typically, expenses of the project office in India can be met only out of inward remittances from the head office, or rupee amounts received locally under the approved contract(s).

Outward remittances from the bank account are permitted subject to certain compliance requirements.

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