In the times of global turmoil, India has emerged as an attractive destination for Foreign Direct Investment. However, many entities have dropped their plans due to lack of knowledge/ lengthy procedures / complex paperwork. But given the Government’s initiatives , the
many steps have been taken to increase the ease of doing business in India, and foreign companies are being encouraged to have a footprint in India
There are several ways in which a foreign company can set up business in India.
These are majorly divided into 2 entry strategies based on how the foreign entity wishes to operate
As Indian Entity
As Foreign Entity
Limited Liability Company as Wholly owned subsidiary (WOS)\
A foreign company may choose to enter India by establishing a Private Limited company in India as its wholly owned subsidiary. It requires a minimum of two shareholders and foreign companies can hold up to 99.9 percent of its shares.Establishing a limited company provides the most control and strongest presence to a foreign company.LLPs are taxed at 25%/30%, and an additional surcharge of 7%/12% percent is applied to companies if total income exceeds 1 /10 crore.
A Liaison Office (LO), sometimes referred to as a Representative Office, is a good way to establish a new presence in India. An LO liaises, communicating between the parent company and Indian entities. While an LO can promote the parent company’s interests and build a network, it cannot make money within India; all operating costs are borne from internal funds. No tax as there is no Income
A project office operates similarly to a branch office, the main difference being that a company establishes a project office for specific work in India contract for which has already been obtained from an Indian company. Treated and taxed like a foreign company @40%.
Similar to an LO, Branch Office (BO) is not an incorporated company, but an extension of a foreign company. However, unlike LO, BO’s can engage in commercial business as a representative of the parent company. The BO can conduct research, carry out import and export activity, provide consultancy support, provide services in information technology (IT), and provide technical support for products supplied by its parent company. Treated and taxed like a foreign company @40%.