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Entry Strategies for Foreign
Investors
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STARTING OPERATIONS IN INDIA
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A foreign
company planning to set up business operations
in India has the following options
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AS AN
INDIAN COMPANY
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A foreign company can commence
operations in India by incorporating a company under the Companies
Act,1956 through
Foreign equity in such Indian
companies can be up to 100% depending on the requirements of the investor,
subject to equity caps in respect of the area of activities under
the Foreign Direct Investment (FDI) policy. Details of
the FDI policy, sectoral equity caps & procedures can be
obtained from Department of Industrial Policy & Promotion, Government of
India (http://www.dipp.nic.in ).
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Joint
Venture With An Indian Partner
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Foreign
Companies can set up their operations in India by forging strategic
alliances with Indian partners.
Joint Venture may entail the
following advantages for a foreign investor:
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Wholly
Owned Subsidiary Company
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Foreign
companies can also to set up wholly-owned subsidiary in sectors where 100%
foreign direct investment is permitted under the FDI policy.
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Incorporation
of Company
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For registration
and incorporation, an application has to be filed with Registrar
of Companies (ROC). Once a company has been duly
registered and incorporated as an Indian company, it is subject to Indian
laws and regulations as applicable to other domestic Indian companies.
For details please visit the
website of Department of Company Affairs under Ministry of Finance athttp://dca.nic.in
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AS A
FOREIGN COMPANY
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Foreign
Companies can set up their operations in India through
Such offices can undertake
any permitted activities. Companies have to register themselves with
Registrar of Companies (ROC) within 30 days of setting up a place of business
in India.
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Liaison
Office/Representative Office
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Liaison
office acts as a channel of communication between the principal place of
business or head office and entities in India. Liaison office can not
undertake any commercial activity directly or indirectly and can not,
therefore, earn any income in India. Its role is limited to
collecting information about possible market opportunities and providing
information about the company and its products to prospective Indian
customers. It can promote export/import from/to India and also
facilitate technical/financial collaboration between parent company and
companies in India.
Approval for establishing a liaison office in India is granted
by Reserve Bank of India (RBI).
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Project
Office
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Foreign
Companies planning to execute specific projects in India can set up
temporary project/site offices in India. RBI has now granted general
permission to foreign entities to establish Project Offices
subject to specified conditions. Such offices can not undertake or
carry on any activity other than the activity relating and incidental to
execution of the project. Project Offices may remit outside India
the surplus of the project on its completion, general permission for which
has been granted by the RBI.
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Branch
Office
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Foreign companies engaged in
manufacturing and trading activities abroad are allowed to set up Branch
Offices in India for the following purposes:
(i) Export/Import of goods
(ii) Rendering professional or
consultancy services
(iii) Carrying out research work, in
which the parent company is engaged.
(iv) Promoting technical or financial
collaborations between Indian companies and parent or overseas group company.
(v) Representing the parent
company in India and acting as buying/selling agents inIndia.
(vi) Rendering services in Information
Technology and development of software in India.
(vii) Rendering technical support to the
products supplied by the parent/ group companies.
(viii) Foreign airline/shipping company.
A branch office is not
allowed to carry out manufacturing activities on its own but is permitted to
subcontract these to an Indian manufacturer. Branch Offices
established with the approval of RBI, may remit
outside India profit of the branch, net of applicable Indian taxes
and subject to RBI guidelines Permission for setting up branch offices is
granted by the Reserve Bank of India (RBI).
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Branch
Office on “Stand Alone Basis”
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Such
Branch Offices would be isolated and restricted to the Special Economic zone
(SEZ) alone and no business activity/transaction will be allowed outside the
SEZs in India, which include branches/subsidiaries of its parent office
in India.
No approval shall be
necessary from RBI for a company to establish a branch/unit in SEZs to
undertake manufacturing and service activities subject to specified
conditions.
Application for setting up
Liaison Office/ Project Office/ Branch Office may be submitted in form FNC 1
(available at RBI website at www.rbi.org.in )
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FOREIGN
DIRECT INVESTMENT (FDI) POLICY
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FDI under
automatic route is now allowed in all sectors, including the services sector,
except a few sectors where the existing and notified sectoral policy does not
permit FDI beyond a ceiling.
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Automatic
Route
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No
prior approval is required for FDI under the Automatic Route. Only
information to the RBI within 30days of inward remittances or issue of shares
to Non Residents is required. RBI has prescribed a new form,
Form FC-GPR (instead of earlier FC-RBI) for reporting shares issued to the
Foreign Investors by an Indian company.
For details please contact:
Chief General Manager,
Reserve Bank of India, Foreign Investment and Technology Transfer Division, Exchange Control Department, Shaheed Bhagat Singh Road, Mumbai – 400001. Tel.:+ 91-22-2266 1603 Fax + 91-22-2266 5330 |
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Government
Approval
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Foreign
Investment proposed not covered under the ‘Automatic Route’ are
considered for Governmental Approval on the recommendations of the Foreign
Investment Promotion Board (FIPB)
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TAXATION
IN INDIA
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India is
moving towards reforming its tax policies and systems so as to facilitate
globalization of economic activities. The corporate tax rate for
foreign companies is 40%. The net tax rate is far lower than this
on account of various deductions and exemptions available under the tax
laws. Tax holidays are available in Special Economic Zones set up to
make industry globally competitive. Infrastructure Sector Projects enjoy
special tax treatment/holidays. A user friendly tax administration is
being introduced with round the clock electronic filing of
customs documents from 31.3.04
For details regarding taxes
in India, please contact Ministry of Finance, Government of India, North
Block, New Delhi – 110 001 through their website http://finmin.nic.in/topics/taxation/index.html
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INVESTMENT
FACILITATION
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Secretariat for Industrial
Assistance (SIA) in Department of Industrial Policy and Promotion,
Government of India provides a single window service for
entrepreneurial assistance, Investor facilitation and monitoring
implementation of the projects.
Secretariat for Industrial
Assistance (SIA)
Department of Industrial Policy and Promotion Ministry of Commerce & Industry Udyog Bhavan, New Delhi-110 011 Email: dipp_sia@ub.nic.in Tel.: +91-11-23011983 Fax : +91-11-23011034 |
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USEFUL
ADDRESSES
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Department of Industrial Policy
and Promotion
Joint Secretary
Secretariat for Industrial Assistance (SIA)Ministry of commerce & Industry Udyog Bhavan, New Delhi-110 011 ,INDIA Tel.: +91-11-23011983 Fax : +91-11-23011034 E-mail: sia_dipp@ub.nic.in Website: http://dipp.nic.in |
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Reserve Bank of India (RBI) Foreign Investment Division,Shaheed Bhagat Singh Road, Mumbai-400 001, INDIA Tel.: + 91-22-2266 1603 Fax : + 91-22-2266 5330 Web site: http://www:rbi.org.in |
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Registrar of Companies Department of Company Affairs Ministry of Finance ‘B’ Block, IInd Floor, Paryavaran Bhawan C.G.O. Complex, New Delhi-110 003, INDIA Tel.: +91-11-24362708 Website: http://dca.nic.in |
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