INDIAN SUBSIDIARY COMPANY REGISTRATION

INTRODUCTION

Foreign subsidiaries are of great value as they allow Indian companies to expand their company’s operation globally. By establishing a foreign subsidiary, the Indian company can enter new markets, access new customers, and diversify its revenue streams. Additionally, foreign subsidiaries can provide Indian companies with the tax benefits, as they may be subjected to lower tax rates in the foreign country.

WHAT IS INDIAN SUBSIDIARY COMPANY REGISTRATION?

Formation of a subsidiary is undoubtedly a smart and favoured means for extending one’s business to foreign countries of your choice. With a growth rate of more than 7%, India is considered to be the most preferred destination for business. While operation from India, one can have access to 1.3 billion population with the worlds most skilled manpower.

A subsidiary is an entity registered in a foreign nation. For setting up a subsidiary, the parent company must own at least 50% of the subsidiary. When the holding company owns 100% of the subsidiary then the subsidiary is known as a wholly-owned subsidiary of the parent company. A subsidiary company is partially or wholly owned by some another large corporation. This parent corporation must have its headquarters in another country. A subsidiary works as per the laws of the country in which it is incorporated.

The parent company, however, has to carry the financials of the foreign subsidiary on its books. The foreign subsidiary has to obey the laws of the country they are operating in. For Example, Instagram, LLC – a photo-sharing site acquired by Facebook in April 2012 for approximately US$1B in cash and stock.

A foreign company can create an Indian subsidiary with the following company structure

• PRIVATE LIMITED COMPANY : This company structure is not open to the public offering but enjoys other benefits over Public Company given by the Companies Act, 2013
• PUBLIC LIMITED COMPANY : This company structure is not open to the public offering is possible but required to comply with few more rules and regulations as compared to Pvt. Ltd as specified by the companies Act, 2013.
• LLP : This company structure is where the liabilities of partners are limited.

WHAT ARE THE TYPES OF SUBSIDIARIES IN INDIA?

India is growing at breakneck pace as a bolt of lighting in attracting foreign investments. Many companies have been eyeing the country to establish their presence as a subsidiary company or a joint venture. There are several Indian subsidiaries companies, each with its own characteristics and benefits. It is essential to choose the right type based on your business needs and goals. Suppose you are planning to establish a subsidiary company in India and there are various types and some of them are discussed as under:

• WHOLLY OWNED : A wholly owned subsidiary is owned and operated by a parent company. This subsidiary company has all the company and participate as a supreme authority in the decision-making. No wonder foreign companies who wish to rule their operations in India adopt such a form of subsidiary company.
• JOINT VENTURE : As the name suggested, a joint venture subsidiary company is jointly operated by two or more companies forming this alliance. For instance, these companies collaborate on various projects and rule the market together. Additionally, the company ownership and control of subsidiary companies are shared with the parent companies.
• LIMITED LIABILITY PARTNERSHIP : Limited liability partnership (LLP) for a subsidiary company refers to a type of subsidiary company formed as a partnership. In addition, this form of subsidiary provides liability protection to its partners, which does not make them personally liable for the debts or obligations of the subsidiary company.

UNLOCKING BENEFITS OF THE INDIAN SUBSIDIARY COMPANY LICENSE

You might have heard about the foreign subsidiary of an Indian company & ways in which it benefits from various provisions and incentives. For instance, a subsidiary company us legal entity that a parent company controls. In this section, we will discuss the benefits of subsidiaries in India-

The benefits of Indian subsidiary companies are numerous. lets have a look at them:

• LIMITED LIABILITY : One of the most significant advantages of the Indian subsidiary company is limited liability. Being a legal entity, the subsidiary company has its liability and debts. For instance, the parent company’s assets and financial resources are protected in case and legal issues with the subsidiary company.
• SOLIDIFYING LOCAL PRESENCE : Setting up a subsidiary company exposes your business to the local presence, such as Indian Market. Such a thing can be advantageous in mending ties and solidifying relationships with suppliers and stakeholders. This helpful strategy might help you gauge within the local market in creating a business strategy according.
• TAX BENEFITS : India offers tax benefits to foreign companies aiming to setup a subsidiary company there. As a cherry on the cake, companies can take advantages of the governments incentives, such as tax rates and holidays. Such a thing ought to increase profitability while reducing the tax burden.
• JOINT VENTURES : To make sure to notice, various companies can come together, partner and collaborate in giving rise to a joint venture as a subsidiary, which might be beneficial in contributing towards the increased revenues and enhanced market coverage.

TAX BENEFITS FOR INDIAN SUBSIDIARY COMPANIES CERTIFICATE

Are you considering expanding your business operation to India?

If so, you may be wondering about the tax implication of opening a subsidiary in the country. The good news is that several tax benefits come with setting up a subsidiary in India.

The tax benefits for subsidiaries in India stated are as follows:

• RULES FOR MINIMUM ALTERNATE TAX : ARE EXEMPTED FROM FOREIGN COMPANIES It is often viewed that all the foreign companies favoured and applied for presumptive taxation are exempted from MAT provisions. No wonder it keeps foreign companies at a profit. It allows them to undertake shipping, oil exploration & transportation activities.
• TAX RATES REDUCED FROM 30% TO 25% : With the provision released from the financial year (2018-19) the income tax and applicable charges are reduced to 25%. For instance, it is ruled out for the domestic companies, recording a total turnover with gross receipts of at most 250 crores for a year ending on 31st March 2017.
• DEDUCTION OF EXPENSE INCURRED FOR SETTING UP A BUSINESS : The expenditure incurred by the company to establish a business is deemed eligible to amortize an expense over five years, starting from the day it commenced. Such a thing assures the flexibility for the companies to postpone their claim of expenditures for five years. In addition, this claim must be restricted by the employed capital of the company.

In conclusion, setting up a subsidiary company in India can be complex. Still, it can be a rewarding and profitable venture with the proper knowledge and guidance.

DOCUMENTS REQUIRED FOR OPENING A SUBSIDIARY COMPANY

Some of the basic documents that are required for opening a subsidiary companies are as follows

COMPANY RELATED DOCUMENTS

• One should provide a MOA (Memorandum of Association) & AOA (Article of Association)
• The need for sufficient proof of the Address/place of business with attached documents.
• Copy of utility bill
• Copy the resolution submitted by the prompter company along with the capital layout documents.
• Copy of the certificate of incorporation to be gained from the foreign corporates.

DOCUMENTS RELATED TO DIRECTORS OR SHAREHOLDERS

• Digital signature certificate and Digital identification number for the shareholders and directors.
• Address and identity proof from director and shareholders.
• Photograph of shareholders and directors.
• Declaration issued by director or shareholders.

COMPLIANCE FOR FOREIGN SUBSIDIARY OF INDIAN COMPANY

Foreign subsidiary companies are subjected to acquiring goods and services tax (GST) to ensure a smooth supply of goods and services in India.

• GST (GOODS AND SERVICE TAX) : The foreign subsidiary companies are subjected to acquiring GST (Goods and Services Tax) to ensure a smooth supply of goods and services in India.
• INCOME TAX : The foreign subsidiary companies are subjected to paying income tax or the earned profits in India. The change tax rate o the foreign companies adds a surcharge and education cess. Also, taxes are suppressed from foreign companies on the payment made by the residents, such as royalties, dividends, and interest
• TRANSFER PRICING REGULATION : The transfer pricing is carried out equally between the foreign subsidiary company and its known partners. Suppose the transactions are not initiated on an equal footing. In that case, the Indian authorities might step in and adjust the prices while granting the tax accordingly.