May 27, 2009 Prepared by: Deepak Maharishi1

MODES OF SET UP

Wholly Owned Subsidiary

Joint Venture Company

Branch Office

Liaison Office

Project Office

May 27, 2009 Prepared by: Deepak Maharishi2

POINTS TO REMEMBER

Mechanism for opening

Tax Rates

Compliance

Comfort Level

Miscellaneous

May 27, 2009 Prepared by: Deepak Maharishi3

WHOLLY OWNED SUBSIDIARY

Mechanism Tax Rates Compliance Comfort Level Miscellaneous An independent company incorporated as per Indian Companies Act, 1956 & Transfer of Shares to foreign entity to make it as WoS.

A wholly owned subsidiary can also be incorporated directly of Foreign Parent Company.

A minimum of 2 promoters required to incorporate the same.

Normal Rate applicable to Indian Companies which 30% (plus surcharge and education cess)

Regular compliance as per Companies Act, 1956.

Moderate

Incorporation is easy.

100% FDI is allowed for the sector in which WOS is proposed to be engaged.

Winding up/ Striking off is complex as compared to Branch Office.

If the company is incorporated in India without the status of WoS then the minimum capital requirement is Rs. 1,00,000/- Only.

If the company is directly incorporated as subsidiary of foreign parent company then minimum capital is USD 2000 (if Private Ltd.) or USD 10000 (if Public Limited).

May 27, 2009 Prepared by: Deepak Maharishi4

JOINT VENTURE COMPANY

Mechanism Tax Rates Compliance Comfort Level Miscellaneous

A Joint Venture Agreement shall be entered with an Indian entity.

A JV company then can be incorporated under Indian Companies Act.

A minimum of 2 promoters required to incorporate the same.

Normal Rate applicable to Indian Companies which 30% (plus surcharge and education cess).

Regular compliance as per Companies Act, 1956.

Moderate

Incorporation is easy.

100% FDI is allowed for the sector in which JV is proposed to be engaged.

Winding up/ Striking off is complex as compared to Branch Office.

An intimation to be given to RBI as and when money is infused within 30 days both from the receipt of money and allotment of shares.

May 27, 2009 Prepared by: Deepak Maharishi5

BRANCH OFFICE

Mechanism Tax Rates Compliance Comfort Level Miscellaneous Can be opened only with RBI approval.

An application is to be made through FNC-1 to CGM, Exchange Control Dept, RBI, Mumbai

Rate applicable to Branch Office @ 40% (plus surcharge and Education cess).

An annual compliance letter to be filed with the RBI from Auditors.

Documents to be filed with the RBI through Authorised Dealer in case of remittance of money.

Accurate (Except Tax Rates)

Can easily be set up by submitting the following:-Form FNC-1- 3 yrs Accounts- Incorporation Certf.-Reason for opening-Company Profile-Board Resolution-Power of Attorney in favour of representative

Can be opened for following activities:-Export/Import-Rendering professional / consultancy services-Technical / Financial collaborations- As Buying/ Selling agent-Services in IT-Technical support to parent company-Foreign Airline/ Shipping Company

Specific Permission for any other activity.

May 27, 2009 Prepared by: Deepak Maharishi6

LIAISON OFFICE

Mechanism Tax Rates Compliance Comfort Level Miscellaneous Acts as a channel of communication.

An application is to be made through FNC-1 to CGM, Exchange Control Dept, RBI, Mumbai

Can not undertake any commercial activity.

Is regulated under FEMA & RBI and initially permission for 3 yrs is granted.

It does not constitute a taxable entity, however, withholding tax may be levied on certain transactions/ payments.

An annual compliance letter to be filed with the RBI from Auditors.

Documents to be filed with the RBI through Authorised Dealer in case of remittance of money.

Not recommended as the Company can’t carry out any commercial activity.

Can be opened for following activities:- Representing parent company-Promoting Export/ Import from India-Promoting technical/financial collaboration between parent and Indian Companies-As communication channel

Specific Permission for any other activity.

May 27, 2009 Prepared by: Deepak Maharishi7

PROJECT OFFICE

Mechanism Tax Rates Compliance Comfort Level Miscellaneous Can only be set up for executing specific Project.

General permission granted by RBI.

Excludes Liaison Office.

Any company which has secured a contract from an Indian Entity can set up a Project Office.

It is treated as extension of foreign corporation in India and taxed @ applicable to foreign corporations.

Requirement to furnish a prescribed report to RBI regional office.

Documentary evidence that Project is funded by Bilateral/ Multilateral Financial agencies or Project has been cleared by Regulatory Authority or Indian company has been granted a loan by Indian Bank/FI.

Not recommended as the Company can’t carry out any other commercial activity than the specific project for which it has been set up.

Can be opened without the specific permission of RBI (Notification No. FEMA 95/2003-RB)

Application can be sent for approval to Central Office, Foreign Exchange Dept, RBI if the required criteria is not met.