Foreign company can commence business in India either by :
1) Opening a new Company in India and
2) Opening a Branch office in India.
The procedural & documentation requirement along with our recommendation summarized below
OPENING NEW COMPANY IN INDIA:–
To start business in India a New Private Limited Company can be formed in India with ease. The requirements for the same are as follows:-
– Director Requirement: – Minimum Two Directors will require for formation of pvt. Ltd. Company in India. For operational smoothness one can be Indian director holding 1% shares and for controlling aspect second director who is promoter of foreign company can hold 99% shares In the Company.
– Capital Requirement: – Minimum fun required to set up company is INR 2,00,000/- which can be contributed as INR 1,00,000/- each by both the directors.The funding required for business operation of the company can be taken as Loan from foreign company and it can be repatriated back again in future if required.
– Digital Signature: – DSC of both the directors are required to be for uploading forms with ROC. To apply for DSC KYC documents (ID& address proof) of both Indian Director and foreign promoter Director will require. The documents of NRI director need to be attested/certified by foreign embassy.
– Name Approval: – To form new company name of the company needs to get approved by ROC, for name approval we are required to apply in specified form with ROC. By the time ROC approve the name simultaneously we can apply for DSC to expedite the formation process.
– Address Proof: – For address proof of new company lease deed of new company is required.
– Income Tax: – Company Set up India is taxed with lower rate of Income Tax i.e. 22% plus surcharge as applicable.
– Statutory documentary requirements: – The newly established Indian company needs to obtain PAN no. TAN No. and GST No. After incorporation of company these documents can be obtained easily.
Open New Branch Office of Foreign Entity in India:-
– RBI Approval: – A foreign company can freely operate in India by registering a branch by obtaining approval of the reserve bank of India through AD bank. The foreign company required to file prescribed form with RBI to get the approval.
– Digital Signature of Authorised Signatory:-DSC of both the directors is required for uploading forms with ROC. To apply for DSC KYC documents (ID & address proof) of both Indian Director and foreign promoter Director will require. The documents of NRI director need to be attested/certified by foreign embassy.
– ROC registration: – After approval of RBI for establishment of the branch office in India an application for Registration of the foreign company is required to be filed with the Registrar of Company.
– After FNC Form is filed with the AD Bank, a request for verification of documents is sent to the banker of the foreign company. This process is also known as swift based verification. After receipt of confirmation of the documents from the foreign banker, the next process of approval is proceeded with. The RBI/AD Banker may seek clarification or any additional document which need to be submitted.
– Income Tax: – Branch office is treated as a foreign entity and is subject to higher Income Tax @ 40% pus surcharge as applicable.
– The establishment of place of business in India for a foreign company/corporation is governed by the Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016. For the purpose of setting up a Branch Office the net worth of foreign head office must be above $ 100,000 and the applicant company should have profitability track record of Five Years.
– Name of the Branch Office: –The name must be the same as that of the foreign parent company, and for each new office of such a branch office, a fresh approval is required from RBI with justification.
– Statutory documentary requirements: – The branch need to obtain PAN no. TAN No. GST No. and IEC for the branch office of the foreign Company.
– Registration with State Police: – Finally, the branch office needs to register it with the state police (In the office of the superintendent of Police). The application must be accompanied by the RBI approval and KYC of all authorised person in India and Foreign Company.
Our recommendation- By going through the detailed procedural requirements, the documentation requirement, we feels that forming a new company in India is not only simpler and cost effective than setting up of branch office of foreign company but also save substantial amount of income tax to the company.
Disclaimer: the above article is prepared for general understanding & study purpose. The view expressed here are our personal view. We strongly recommend taking expert opinion & consultation before taking any decision on the same.