Indian Subsidiary Company Registration

Formation of a subsidiary is undoubtedly a smart and favored means for extending one’s business to foreign countries of 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 world's 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 is a partially or even a wholly-owned company by 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, IBM India private limited is a subsidiary of IBM.

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 where 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.

India is growing at a breakneck pace as a bolt of lightning in attracting foreign investment. Many companies have been eyeing the country to establish their presence as a subsidiary company or a joint venture. There are several Indian subsidiary 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. In that case, it is advisable to seek advice from Corpseed, who can guide you through the process. Let us have a look at its types-

• Wholly owned subsidiary company

A wholly-owned subsidiary is owned and operated by a parent company. The subsidiary company has all the rights and controls over the parent company and participates 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 Subsidiary Company

As the name suggests, 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 ownership and control of subsidiary Companies are shared with the parent companies.

• Limited liability Partnership (LLP) for Subsidiary Company

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.

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 is a 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; let us have a look at a few of 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 liabilities and debts. For Instance, the parent company's assets and financial resources are protected in case any legal issues arise 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 accordingly.

• Tax Benefits

India offers tax benefits to foreign companies aiming to set up a subsidiary company there. As a cherry on the cake, companies can take advantage of the government incentives, such as tax rates & holidays. Such a thing ought to increase profitability while reducing the tax burden.

• Joint venture

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.

What are the Tax Benefits for Indian Subsidiary Companies Certificate?

Are you considering expanding your business operations to India? 

If so, you may be wondering about the tax implications 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 (MAT) 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 provisions 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 the 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 (involved in doing the project) 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.

Suppose you are planning to open an Indian Subsidiary company. In that case, there are several documents that you'll need to prepare and submit. These documents are necessary to comply with Indian laws and regulations and ensure your subsidiary is legally established and recognized.

The following are the required documents, which are divided into two categories & contribute to the process of filling up the application, which is as follows-

Company-related Documents

• One should provide a Memorandum of Association & Articles of Association
• The need for sufficient proof of the Address/place of business with attached documents.
• Copy of utility bills
• Copy the resolution submitted by the promoter company along with the capital layout document.
• Copy of the certificate of Incorporation to be gained from the foreign corporates.

Documents related to Directors/Shareholders

• Digital signature certificate (DSC) And Digital Identification Number (DIN) for shareholders & directors.
• Address & identity proof from directors & shareholders.
• Photographs of shareholders & directors.
• Declaration issued by Directors & shareholders.

Step 1: Obtain DSC (Digital Signature Certificate)

The initial step toward Foreign Subsidiary Company Registration in India is to applying for DIN (Director’s Identification Number) and DSC (Digital Signature) of the Directors. Following documents are required in order to obtaining the DSC and DIN:

• Photo ID Proof of Business Owner: Aadhar card | Arms License | Department Id | Driving License | Freedom
• Address Proof: Aadhar card | Arms License | Department ID | Driving License | Freedom Fighter ID Card | Pan Card | Passbook | Passport | Ration Card | Voter id card
• Proof of Possession of Premises: Sale deed | Rent agreement | Electricity Bill, etc.
• Photo: Passport size photograph

Note: Documents for non-residents and foreign citizens shall be notarized by the competent authority.

Step 2: Name Application Approval

• One of the most important steps is to choose a unique and available name for the proposed Company.

Step 3: Name Application Approval

• It is the final step for Foreign Subsidiary Company Registration Process. This requires filing of the Articles of Association of the Company and Memorandum along with several other documents by the proposed directors and shareholders.
• After the Incorporation application is approved, the Registrar will issue a Certificate with a Corporate Identification Number (CIN). The TAN and PAN of the Company will be issued.

Foreign subsidiaries of Indian companies are obligated to the payment of various taxations and certifications, out of which the following are of importance-

• Goods & Services Tax

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

• Income tax

The foreign subsidiary companies are subjected to paying income tax or the earned profits in India. The charged tax rate on the foreign companies adds a surcharge and education cess. Also, taxes are suppressed from foreign companies on the payments made by the residents, such as royalties, dividends and interest.

• Transfer pricing regulations

The transfer pricing is carried out equally between the foreign subsidiary company and its known partners (also the parent company). Suppose the transactions are not initiated on an equal footing. In that case, the Indian authorities might step in & adjust the prices while granting the tax accordingly.

Compliances and Treatment of Share

FEMA regulates the Foreign Investments in Indian Companies and the Reserve Bank of India (RBI). In case holding enterprise invests funds in the share capital of the Indian subsidiary, this has to be followed by RBI guidelines along with compliances under Companies Act 2013.

RBI Compliances

• By the time of receipt of funds: Such transaction has to be reported to RBI in details, within 30 days of receiving funds from foreign investor(s).
• The share of the company should be allotted within 180 days from the date of receiving funds.
• On allotment of shares: On allotment of the shares, company has to report in specified form (FC-GPR) to the RBI, within 30 days from the time of issue of shares.

At Corpseed, we understand the importance of having a subsidiary company registration. It is a crucial step towards expanding your business and reaching new heights of success. Our team of experts has years of experience and extensive knowledge of the procedures involved in obtaining a subsidiary company registration. We are well-versed in the legalities and regulations of the process, ensuring that your registration is completed seamlessly and efficiently. With our expertise, you can rest assured that your subsidiary company registration will be handled with the utmost care and professionalism.

So, if you are looking for a reliable and experienced team to handle your subsidiary company registration, look no further than Corpseed.