BUSINESS STRUCTURE IN INDIA FOR FOREIGN NATIONALS
A foreign company or Nationals planning to set up in business operation in India has the following option:
- AS AN INDIAN COMPANY
A foreign company or Nationals can start working operation in India by registering itself as Public or Private Limited Company under Companies Act, 2013 through.
A. Joint Venture:
Foreign company can set up their business operations in India by entering in Joint venture with an Indian Company.
Joint Venture may have the following advantages for foreign investors:
- Getting established Infrastructure, Distribution and Marketing channel of Indian Partner.
- Getting Available financial resources of Indian Partner.
- Getting established contacts of the Indian Partner.
The above benefits help investors to smoothen the process of setting up business operation in India.
B. Wholly Owned Subsidiary Company
Foreign Company or Nationals can also set up an entity in which they have 100% shareholdings. Wholly owned subsidiary permissible in sector where 100% FDI is permitted.
2. AS A FOREIGN COMPANY
Foreign companies and Nationals can set up their operations in India through:
A. Representative Office (Liaison Office)
This office acts as a communication channel between the Principles places of business or head office and entities in India. It itself can not undertake any commercial activity directly or indirectly. It cannot earn any income in India.
A liaison office assists the parent company in:
- Promoting Import/Export to and from India.
- Promoting technical and financial collaborations with other resident firms.
This office is a good option if a foreign company or national want to know the Indian market before committing major resources through the setup of a permanent establishment in India. Basically it is ideal setup to provide after sales customer support to local clients.
Approval for establishing a Representative Office in India is granted by Reserve Bank of India.
B. Project Office
This type of office may be set up to carry out a specific contract for a specified time period within India. It means foreign company planning to execute specific projects in India can set up temporary project office in India. After the project is completed the entity will be terminated. Such office can not undertake any activity other than the activity incidental to execution of the project.
Project office may remit outside India the surplus of the project on its completion, subject to the prevailing exchange controls.
RBI has now granted general permission to foreign entities to establish project offices subject to specified conditions.
Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up Branch Offices in India for the following purposes:
- Export and Import of goods
- Rendering professional or consultancy services
- Carrying out research work, in which the parent company is engaged.
- Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
- Representing the parent company in India and acting as buying/selling agents in India.
- Rendering services in Information Technology and development of software in India.
- Rendering technical support to the products supplied by the parent/ group companies.
- Foreign airline/shipping Company.
A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer. Branch Offices established with the approval of RBI may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines Permission for setting up branch offices is granted by the Reserve Bank of India (RBI).
Registration of a branch office is usually not advisable in India. An Indian branch of a foreign company has not only as much administrative requirements as a subsidiary but also the disadvantage of incurring 43% corporate tax and presenting higher risk to liabilities directly borne by the parent company.