7 Important Points Relating to Foreign Company Registration in India

In September 2022, India has become 5th largest economy in the world surpassing United Kingdom. Over the years, India has become one of the most sought-after business destinations in the world, attracting more and more foreign companies to make investments in India as well as set up their business in India in one form or the other. Before deciding to set up business in India, every foreign company shall keep in mind the following 7 important points relating to foreign company registration in India.

  1. Huge Market: India is a huge consumer market. It has a large middle class consumer base approx. 400 to 500 Million consumers with good purchasing power. This made Indian market a very attractive destination for global players.
  2. Democratic regime in India: India is the world’s largest democracy and is also one of the oldest democracies. It provides political stability in the country which enthuses confidence amongst the foreign businessmen as well as the investors.
  3. Availability of skilled and unskilled manpower: India has the highest number of engineers, management graduates and other skilled and unskilled staff which are available at very competitive price as compared to the western countries that can perform quality work at very low cost.
  4. Government policies and schemes: Indian government has taken many initiatives for ease of doing business and attracting more and more companies to set up their business in India and make investment in India. Some of the initiatives are Make in India Scheme; Production lined Incentive Scheme, One window clearance for various approvals required for setting up factories in India, Startup India Scheme etc. This has attracted more and more foreign companies to set up their businesses in India
  5. Flexible options for foreign company registration in India: Foreign company registration in India can be in the form of incorporated entity as well as in the form of an un incorporated entity. As an incorporated entity, a foreign company has an option for business set up in India in the form of either wholly owned subsidiary company or Limited Liability Partnerships or Joint Ventures. As an unincorporated entity, a foreign company has an option to set up business in India in the form of either branch office or liaison office or project office.
    Each of the aforesaid entities has their own pros and cons and one may decide for a particular entity on the basis of their nature of business, their long term planning and goals for doing business in India. Liaison office cannot do any business in India or earn profits from India. They act only as a representative office of the foreign company in India. They act as a channel of communication between India customers and parent company. Their legal status in India is that of a foreign company. Branch office can do trading activities as well as provide service in India. However, they can be indulging in only those activities which have been permitted by RBI. They cannot do manufacturing activities in India. Their legal status in India is that of a foreign company. They are considered as Permanent Establishment of foreign entity in India. They are taxable in India at highest rate of 40% plus surcharge plus education cess.
    Project office can do all the activities permitted by the RBI. Normally, project offices are opened for a particular project and once the project is completed, it is closed. They are taxable in India at highest rate of 40% plus surcharge plus education cess. Unlike Branch office and liaison office, there is no restriction on business activities of wholly owned subsidiary companies. They can do all the activities as mentioned in its Memorandum of Understanding and subject to guidelines of RBI. They are taxable at lowest rates as compared to other forms of entities. They have many advantages as compared to other forms of entities in India.Foreign companies may also register joint ventures in India for the purpose of execution of particular project or particular objectives and once the object is achieved, the joint venture may be closed. It can be by way of contractual agreement between two parties or by way of acquisition of shares of each other entity or some new entity. It is similar of private limited companies or wholly owned subsidiaries.
    • Another popular form of entity registration by foreign entities in India is in the form of Limited Liability Partnership registration or LLP registration
    • Out of all the above options, Subsidiary Company Registration in India is most popular and tax efficient option.
  6. Subsidiary company registration in India is one of the most popular form of entity registration: In comparison with the other forms of entity registration in India, subsidiary company registration is one of the most popular forms of entity registration in India since it has many advantages like It has minimum corporate tax as compared to other forms of company registration in India. It can use the brand name of its parent entity. It has separate legal entity and it is not considered as an extended arm of foreign entity unlike branch offices and liaison offices. It is not considered as Permanent Establishment of its parent entity and therefore, there is no exposure of parent company to pay taxes in India, unlike branch office.
  7. Minimum requirement and process of subsidiary company registration in India: Minimum 2 Directors and 2 shareholders are required for subsidiary company registration in India out of which at least 1 Director shall be Indian Resident. There may be any numbers of foreign directors and/or shareholders. Shareholders can be Company or Individual. To begin with, Digital Signature of all Directors is prepared. Thereafter, name approval form is filed with Registrar of Companies [ROC]. Two or three names are provided to ROC and any one name as per the discretion of ROC gets approved.Third step is drafting of Memorandum and Article of Association and Director Identification number and other documents for filling online ROC form and applying for final incorporation. Finally, Certificate of Incorporation [COI] is obtained. Once COI is obtained, Bank account need to be opened. Then share subscription money is brought in bank account by all the shareholders including foreign shareholders.
    Reserve Bank of India, Indian apex Bank for regulating foreign exchange need to be intimated about receipt of FDI from foreign company/foreign citizen. Once entire share subscription money is received in the Indian bank account, Certificate of commencement of business is applied with ROC/MCA. It may be noted that in case, share subscription money is coming from any countries with which India shares its borders, then in that case, prior approval of FIFP is required to be taken before such money can be brought into the Indian bank account. Similarly, in case the investment is required to be made in such activities which do not fall into automatic routes, in such cases also, prior approval of government/FIFP is required to be made.
    How can EZYBIZ India help you in business set up in India
    • Advisory on type of entity to be registered
    • Complete hand holding in entire registration procedure
    • Assistance in getting all the approvals and licenses
    • Assistance in opening Bank account
    • Assistance in all Post Registration Taxation, Audit and Regulatory Compliance
    • Assistance in winding up or closure of company in India and repatriation of money
    In case foreign company wants to set up manufacturing unit in India, we can provide complete handholding in feasibility study, land acquisition, getting all approvals and licenses, factory construction, trial run etc.