Foreign companies, as such, find India an attractive destination for the expansion of their business. One of the best modes through which foreign companies enter the Indian market is through a foreign subsidiary company. But, for this, the process of foreign company incorporation in India and tax implications is very important. In this article, we will discuss step by step foreign subsidiary company registration in India and help understand how Groom Tax will help the foreign investor tackle the complex regulatory environment of India.
What is a Foreign Subsidiary Company in India?
A foreign subsidiary company in India is basically a company where a foreign parent company holds more than 50% of the shares or voting power. This would be considered as a different legal entity under Indian law and is allowed to operate business activities in the country, subject to compliance with local regulations and Foreign Direct Investment policies.
Key Steps for Foreign Subsidiary Company Registration in India
1. Choose the Business Structure
The first step in foreign company registration in India is deciding the structure of your subsidiary. Most foreign companies opt for a Private Limited Company due to its limited liability, flexibility, and easier management. A Public Limited Company is another option for companies that plan to raise public funds.
2. Obtain a Digital Signature Certificate (DSC)
A Digital Signature Certificate (DSC) is required for submitting documents electronically. This is mandatory for both the foreign directors and authorized signatories.
3. Obtain Director Identification Number (DIN)
All directors of the subsidiary must obtain a Director Identification Number (DIN). This unique identification number is issued by the Ministry of Corporate Affairs (MCA).
4. Name Reservation
A unique name for your foreign subsidiary company must be chosen and approved by the MCA. The name should not be identical or similar to any existing company name. You can apply for name approval through the Reserve Unique Name (RUN) application.
5. Prepare and File the Incorporation Documents
The second step is to prepare the Memorandum of Association (MOA) and Articles of Association (AOA). These documents will define the objectives, powers, and internal management of the company. After preparation of the documents, present them before the MCA for registration.
6. PAN and GST Registration Application
Your foreign subsidiary company would need a Permanent Account Number for the purpose of taxation. If your company’s turnover is beyond the prescribed threshold, then you would be liable to register for Goods and Services Tax.
7. Registration with RBI
Foreign investments in India are governed by the FEMA and the FDI policy. The RBI monitors foreign investments, and the foreign parent company has to comply with all the relevant regulations.
Groom Tax: Streamlining the Process for Foreign Investors
There are, however, certain risks associated with setting up a foreign subsidiary company in India, such as the huge market and skilled labor available in India. In this scenario, Groom Tax would be of use.
Groom Tax provides all services to foreign investors who intend to incorporate a company in India. From foreign company incorporation in India to expert guidance for foreign subsidiary company registration in India, Groom Tax ensures that investors comply with all local tax laws and regulations.
Groom Tax also assists foreign companies in tax planning and compliance. For international companies, India’s taxation system, including corporate taxes, transfer pricing regulations, and GST, is hard to understand. Groom Tax’s consultants have a lot of experience in guiding international companies on how to manage tax obligations, minimize liabilities, and take advantage of available incentives.
Benefits of Foreign Subsidiary Registration in India
1. Market in India: India is the market that provides a massive number of consumers, which comprises of the middle class that keeps growing and also increases in terms of internet penetration rapidly.
2. Liability: The foreign parent company’s liability is just restricted to its investment in the subsidiary, thus lowering financial risks.
3. Tax Incentives: There are several tax benefits available for foreign investors under India, especially for those involved in manufacturing and technology sectors.
4. Operations: Foreign parent companies retain control over all operations in the Indian subsidiary.
Registering a foreign subsidiary company in India is a very promising approach for international companies who intend to enter the Indian market. However, for the effective incorporation of such companies, one must know about regulatory, legal, and tax requirements. Groom Tax is committed to helping foreign investors navigate through all processes for foreign company incorporation in India and foreign subsidiary company registration in India to ensure proper compliance and tax requirement in an efficient manner.
To learn more, please visit Groom Tax to discover how we may help you enter into India as smoothly as possible.
