Setup Business in India by Foreigners (FDI)
Comparison between the Wholly Owned Subsidiary (WOS), Branch Office (BO), Liaison Office (LO) and Project Office (PO)
| Basis | Wholly Owned Subsidiary (WOS) | Liaison Office (LO) | Branch Office (BO) | Project Office (PO) |
| Meaning | An incorporated entity formed and registered under the Companies Act, 2013. It is a distinct legal entity, apart from its shareholders. | A Liaison Office (also known as Representative Office) can undertake only liaison activities, i.e. it can act as a channel of communication between Head Office abroad and parties in India. It is not allowed to undertake any business activity in India and cannot earn any income in India. | Companies incorporate outside India and engaged in manufacturing or trading activities are allowed to setup Branch Offices with specific approval of the RBI. Normally, the Branch Office should be engaged in the activity of the Parent Company. | Reserve Bank has granted general permission to foreign companies to establish Project Offices in India, provided they have secured a contract from an Indian company to execute a project in India. |
| Constitution | Company form of organization Separate legal entity | An extension of the Head Office. No separate legal standing of its own | An extension of the Head Office with right to accrue income in India. No separate legal standing of its own | An extension of the Head Office with right to accrue income in India. No separate legal standing of its own |
| RBI Permission | General Permission/Automatic Route | General Permission | Specific Permission | General/Specific Permission |
| Permitted Activities | As per main object clause mentioned in Memorandum of Association of Indian Company | Representing in India the parent company. Promoting export / import from / to India. Promoting technical/financial collaborations between parent/group companies and companies in India. Acting as a communication channel between the parent company and Indian companies. | Export / Import of goods. Rendering professional or consultancy services. Carrying out research work, in areas in which the parent company is engaged. Promoting technical or financial collaborations between Indian companies and parent company. Representing the parent company in India and acting as buying / selling agent in India. Rendering services in information technology and development of software in India. Rendering technical support to the products supplied by parent company. Foreign airline / shipping company. | Project is funded directly by inward remittance from abroad; or Project is funded by a bilateral or multilateral International Financing Agency; or Project has been cleared by an appropriate authority; or A company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the project. However, if the above criteria are not met, the foreign entity has to approach the Reserve Bank of India, Central Office, for approval. |
| Criteria for set up | A private company is required to be incorporated with a minimum authorized & paid up capital of Rupees 1,00,000/- and minimum two subscribers. No requirement of track record of parent company as shareholder | Parent Company should have a profit making track record during the immediately preceding 3 financial years in the home country. Net Worth of the Parent Company shall not be less than $ 50,000 or its equivalent. | Parent Company should have a profit making track record during the immediately preceding 5 financial years in the home country. Net Worth of the Parent Company shall not be less than $ 100,000 or its equivalent. | No such Criteria |
| Typical Terms For Approval | A private company is required to be incorporated with a minimum paid-up capital of INR 100,000 and minimum two subscribers. Broadly, it: restricts the right to transfer its shares limits the number of its members (shareholders) to 50; prohibits any invitation to the public to subscribe for any of its shares or debentures; and; Prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives. The conditions will be different for Public Limited Company. | 1. Not to undertake any activity of a trading, commercial or industrial nature and not to enter into any business contracts in its own name without RBI's prior permission. 2. No commission/fees shall be charged or any other remuneration received / income earned by the office in India for the liaison activities/services rendered by it or otherwise in India. 3. The entire expenses of the office in India will be met exclusively out of the funds received from head office through normal banking channels. 4. The office in India shall not borrow or lend any money from/to any person in India without RBI's prior permission. | 1. Not to expand its activities or undertake any new trading, commercial or industrial activity other than that is expressly approved by the RBI. 2. The entire expenses in India will be met either out of the funds received from head office through normal banking channels or through income generated by it in India. 3. The Branch Office will not accept any deposits in India 4. The commission earned by the Branch Office from parties abroad for any agency business will be repatriated to India through normal banking channels 5. Not to undertake any retail trading activity 6. A Branch Office is not allowed to carry out manufacturing or processing activities in India, directly or indirectly. | Not to undertake any activity except project activity for which Office is opened. |
| Time limit of approval | Until the company decides to close down | Normally 3 years from the date of approval | Normally 3 years from the date of approval | Until the project completes. |
| Registrations | The following registrations / approvals will be required: 1. PAN / TAN 2. GST 3. Importer Export Code 4. ROC Registration 5. Shops and Establishment Act Registration | The following registrations will be required: 1. Shops and Establishment Act Registration 2. PAN / TAN 3. ROC Registration 4. Import Export Code | The following registrations / approvals will be required: 1. PAN / TAN 2. GST 3. Shops and Establishment Act Registration 4. Importer Export Code 5. ROC Registration | The following registrations / approvals will be required: 1. PAN / TAN 2. GST 3. Shops and Establishment Act Registration 4. Importer Export Code 5. ROC Registration |
| Liabilities of parent company | The liability of the Parent company is limited to the extent of its shareholding in the WOS. The assets of the foreign company are not subject to any attachments | Parent company's liability is unlimited for all acts and omission of Liaison Office | The liability of the Branch is unlimited. The assets of the parent company are at risk of attachment in case the liabilities of the branch exceeds its assets | The liability of the Project office is unlimited. The assets of the parent company are at risk of attachment in case the liabilities of the project office exceeds its assets |
| Permitted Incomes | All income arising out of its business activities. | The entire expenses of the Liaison Office in India will be met out of the funds received from Head Office through normal banking channels. There will not be any income of the Liaison Office | The entire expenses of the Branch Office in India will be met either out of the funds received from Head Office through normal banking channels or through income generated by it in India. | The entire expenses of the Project Office in India will be met either out of the funds received from Parent Company through normal banking channels or through income generated by it in India |
| Income Tax in India | Any Indian company is taxed @ 25.75% or 27.04% if the taxable income exceeds INR 10,000,000 during any financial year (FY) | Since there is no income accrual, there is no income tax. Liaison Office is required to file information in Form 49C with the Income Tax Department. | Since a branch office of a foreign company is taxed as a foreign company in India, it is taxed @ 41.2% or 42.024% if the taxable income exceeds INR 10,000,000 during any financial year (FY) | Since a project office of a foreign company is taxed as a foreign company in India, it is taxed @ 41.2% or 42.024% if the taxable income exceeds INR 10,000,000 during any financial year (FY) |
| Payment of Dividend | Dividend can be paid after payment of Dividend Distribution Tax | Not Applicable | Not Applicable | Not Applicable |
| Management | Minimum two directors (can be foreign national but one Director must be resident in India) | Liaison Office is managed by Authorized Representative, resident in India. | Branch Office is managed by Authorized Representative, resident in India. | Project Office is managed by Authorized Representative, resident in India. |
| Audit | ||||
| a. Statutory Audit | Financials would be liable to Statutory Audit by a Chartered Accountant | Financials would be liable to Statutory Audit by a Chartered Accountant | Financials would be liable to Statutory Audit by a Chartered Accountant | Financials would be liable to Statutory Audit by a Chartered Accountant |
| b. Internal Financial Control Audit | Compulsory for All Company | Not Applicable | Not Applicable | Not Applicable |
| c. Tax Audit | Applicable in case of Turnover exceeding Rs. 10 million. Non Compliance would result into a penalty @ 0.5 % of the total turnover or Rs. 0.15 million whichever is less | Not Applicable | Applicable in case of Turnover exceeding Rs. 10 million. Non Compliance would result into a penalty @ 0.5 % of the total turnover or Rs. 0.15 million whichever is less. | Applicable in case of Turnover exceeding Rs. 10 million. Non Compliance would result into a penalty @ 0.5 % of the total turnover or Rs. 0.15 million whichever is less. |
| Transfer Pricing | Applicable | Not Applicable | Applicable | Applicable |
| Annual Compliance | ||||
| a. Filing | Yearly filing of financial statements and Annual Return with the Registrar of Companies. Filing of Compliance Certificate if paid up capital exceeds INR 50 Million. Annual Compliance with Reserve Bank of India in case share are allotted to foreign Individual (Form FC-GPR Part A & Part B) Annual return with the Income Tax Department Filing of Quarterly TDS returns Filing of monthly GST Returns | Yearly filings include the filing of audited accounts of the LO, World Accounts with Registrar of Companies Yearly submission of Activity Certificate with RBI and AD Bank Filing Quarterly TDS returns Yearly filing of audited accounts of the Liaison Office with the Directorate of Income Tax, New Delhi File Form 49 C with Income Tax Department | Yearly filings include the filing of audited accounts of BO, World Accounts with Registrar of Companies Yearly submission of Activity Certificate with RBI and AD Bank Annual return with the Income Tax Department Filing of Quarterly TDS returns Filing of monthly GST returns | Yearly filings include the filing of audited accounts of Project office, World Accounts with Registrar of Companies Yearly submission of Activity Certificate with RBI and AD Bank Annual return with the Income Tax Department Filing of Quarterly TDS returns Filing of monthly GST returns |
| b. Meeting | Board - One meeting per quarter Shareholder - One meeting per year | Not Applicable | Not Applicable | Not Applicable |
| Remittance of Profit to Parent company | 1. By way of Dividend subject to Dividend Distribution Tax 2. By way of Royalty/ fees for technical services 3. By way of Management Fees 4. Related party transactions are subject to Transfer pricing Regulations. | None, except upon closure of Liaison Office | Profits can be freely repatriated to the Parent Company subject to payment of applicable taxes. | Profits can be freely repatriated to the Parent Company subject to payment of applicable taxes. |
| Borrowing | 1. There is no restriction on local borrowing. 2. External Commercial Borrowings are subject to guidelines issued by the RBI. | Not allowed | The Branch Office is not allowed to borrow locally unless the prior approval of RBI is taken | There is no restriction on local borrowing. |
Preferred Buyer From
| Location | Anywhere in India |
We are reliable firm providing assorted range of proficient financial services to our esteemed clientele. Our financial experts assist in formation of wholly owned Subsidiary in accordance to our clientele. We owns tons of experience in handling Formation Wholly Owned Subsidiaries with all necessary paper work and obtaining necessary permissions from concerned government agencies. Wholly owned subsidiaries are those companies in which Parent Company owns all the shares of the subsidiary, which gives access to the parent company to select a board of directors of the subsidiary or control the subsidiary. Incorporating Wholly Owned Subsidiary provides the benefits to both parent company and as well as to the subsidiary company and benefit to a parent company who can execute strategic control over its subsidiary company and many more.
Preferred Buyer From
| Location | Anywhere in India |
We are here to handle the tedious task of opening of branch office in accordance to our clients’ requirements. Our financial experts take the onus to arrange for obtaining all necessary documents and requisite permissions from concerned government agencies. Given the shortage of good commercial office space at reasonable prices in major Indian cities, business centers are a viable option for new companies wanting to establish a physical presence. We will do all the efforts to make it one of the best places for doing business for Opening Branch Office for expansion of businesses. We ensure that Opening of new branch offices opens at suitable place will boost the company revenue with optimum results.
Preferred Buyer From
| Location | Anywhere in India |
We have all the answers for your queries in opening of Liaison and Representative Office in India. Liaison and Representative Offices are part of your strategic expansion of your operations in any given place for overall well being of the firm. Setting up a liaison or representative office is a common practice for companies seeking to enter the new market spaces to represent the parent company/group companies, promoting export/import and promoting technical/financial collaboration between parent/group companies. The role of such offices is limited to collecting information about the possible market and to providing information about the company and its products to prospective Indian customers. It cannot undertake any commercial activities and must only use remittances received from its parent foreign company to maintain itself.
Preferred Buyer From
| Location | Anywhere in India |
Project offices are vital components of MNCs to execute their fieldwork with optimum results. Our legal experts are ready with all SOPs for opening up of Project Office at any given place in accordance to our esteemed clientele. Foreign companies planning to execute specific projects in India can set up temporary project/site offices in India for carrying out activities only relating to that project. Indian MNCs with a requirement of operating project offices to serve the project requirements, far away from headquarters/ head office for seamless operations. We ensure that Opening of Project Office opens at suitable place will boost the company revenue with optimum results.
Preferred Buyer From
| Location | Anywhere in India |
When trying to set up or operating a company in India, performing cross-border transactions can be a hassling task as it requires compliance with various laws and legislatures. Two of the most important compliances are compliance with RBI (Reserve Bank of India) and compliance with FEMA (Foreign Exchange Management Act). These central and state regulations can cause delay in transactions and even pose a challenge to various companies in performing the transactions. This is where our RBI & FEMA compliance services come to your assistance. Operating from our base in Delhi, India, we make applications with the Reserve Bank of India and ensure that it is in strict compliance with the Foreign Exchange Management Act. We help you get quick approvals to perform all types of transactions. Apart from that, we also offer advice on all types of inbound and outbound investments that are RBI & FEMA compliant.
