If you’re a foreign company looking to establish your business in India, you’ll need to comply with certain rules and regulations set forth by the Companies Act, 2013. At Ahuja & Ahuja Chartered Accountants, we understand the intricacies of the Indian legal system and can help guide you through the process of setting up a foreign company in India.

Defining a Foreign Company

Under the Companies Act, a foreign company is defined as a company or a body corporate incorporated outside India that has a place of business in India, either by itself or through an agent, physically or through electronic mode and is conducting any business activity in India in any other manner. This means that if your company has a visual presence and is conducting any type of business in India, you’ll fall under the ambit of the definition of a foreign company.

Indian Subsidiary of Foreign Company

If you own 50% or more equity shares in an Indian company incorporated in another foreign nation, then it is considered an Indian subsidiary of a foreign company, where the foreign company is referred to as the holding or parent company.

Foreign Company Setup Checklist

Starting a business in a new country can be challenging. However, our team of experienced Chartered Accountants can provide you with a comprehensive checklist for setting up a foreign company in India. Our services include:

  1. Entity selection: We will help you select the right type of entity, such as a Limited Liability Partnership (LLP), Joint Venture (JV), or Wholly-Owned Subsidiary (WOS).
  2. Registration and Licensing: We will take care of the registration and licensing process for your company, including obtaining the necessary approvals from the Reserve Bank of India (RBI) and the Registrar of Companies (ROC).
  3. Compliance: We will ensure that your company complies with all the necessary rules and regulations in India, including taxation, labor laws, and intellectual property rights.
  4. Bank Account and Tax Registration: We will assist you in opening a bank account and registering for taxes with the relevant authorities.
  5. Virtual Office: We can help you set up a virtual office in India to provide a registered address for your company.

Foreign Company in India and Registration

If you are a foreign company planning to conduct business in India, you’ll need to register your company with the ROC in India. The registration process involves submitting various documents and complying with different rules and regulations. At Ahuja & Ahuja Chartered Accountants, we have helped numerous foreign companies establish their businesses in India and comply with all the necessary legal requirements.

How to Build a Company

Building a company in India involves numerous steps, including choosing the right type of entity, registering your company, complying with legal requirements, and obtaining the necessary licenses and permits. Our team of experienced Chartered Accountants can guide you through the entire process of building a company in India, ensuring that your company complies with all the necessary rules and regulations.

In conclusion, if you’re a foreign company looking to establish your business in India, Ahuja & Ahuja Chartered Accountants can help you navigate the complex legal and regulatory landscape in India. We provide end-to-end solutions, from entity selection to compliance and virtual office services. Contact us today to learn more about our services and how we can help your company establish its presence in India.

How To register a foreign company in India? What is the procedure for foreign company registration in India?

Foreign companies that want to set up a business in India need to follow certain procedures to register their company. Here is a step-by-step guide to register a foreign company in India:

  1. Obtain a Digital Signature Certificate (DSC) from a certifying agency in India for the authorized representative of the foreign company. The DSC is needed for all documents filed electronically.
  2. Obtain a Director Identification Number (DIN) for the authorized representative of the foreign company. The DIN is mandatory for all directors of Indian companies.
  3. Apply for a name availability for the foreign company with the Registrar of Companies (ROC). The name should be unique and not identical or similar to any other company already registered with the ROC.
  4. Once the name is approved, the foreign company should apply for incorporation with the ROC. The application must include the following documents:
  • Memorandum of Association (MOA) and Articles of Association (AOA) of the foreign company.
  • A declaration by the authorized representative of the foreign company that they are not involved in any criminal activities.
  • A list of directors and their personal details.
  • A copy of the certificate of incorporation of the foreign company.
  • A copy of the latest audited financial statements of the foreign company.
  1. After the ROC reviews the application, it will issue a Certificate of Incorporation, which confirms that the foreign company is now registered and authorized to do business in India.

It is important to note that foreign companies must comply with various laws and regulations in India, such as the Companies Act, 2013, Foreign Exchange Management Act (FEMA), and Income Tax Act. It is recommended to consult with a qualified chartered accountant or legal professional to ensure compliance with all relevant laws and regulations.

How alteration in the documents of Foreign Company’s place of business is made?

Any alteration in the documents submitted by a foreign company for its place of business in India can be made by filing Form FC-1 with the Registrar of Companies (RoC) within 30 days from the date of such alteration. The Form FC-1 must be accompanied by the required documents and fees as per the Companies Act, 2013 and the Companies (Registration of Foreign Companies) Rules, 2014.

The following documents must be submitted along with Form FC-1 for making an alteration in the documents of a foreign company’s place of business in India:

  1. A certified copy of the board resolution or power of attorney or any other instrument authorizing the person making the application to make the alteration.
  2. A copy of the updated document that has been altered.
  3. A certified copy of the updated document.
  4. A declaration by a director, manager, or authorized representative of the foreign company stating that the document has been altered and the altered document is true and correct.

Once the RoC is satisfied with the application and all necessary documents have been submitted, it will issue a certificate of registration of the alteration in the documents of the foreign company’s place of business in India.

Preparation of Financial Statements for a Foreign Company in India

In accordance with Schedule III, financial statements for Indian businesses carried out by foreign companies must be prepared and delivered within six months of the end of the financial year. The registrar has the authority to extend this period by up to three months. Other documents must be attached as prescribed under applicable rules and filed in Form FC-3.

Audit of Accounts for Foreign Companies in India

Accounts related to the Indian business must be audited by a practicing chartered accountant, or a firm/LLP of practicing chartered accountants.

Details of Places of Business for Foreign Companies in India

In addition to financial statements, foreign companies must provide details about all Indian business locations on the balance sheet date in Form FC-3.

Attachments Required for Financial Statements and Annual Return

For financial statements, attachments required include a consolidated financial statement of the company, a copy of the balance sheet and profit and loss account, and details of related party transactions, repatriation of profits, transfer of funds, approval letter for each establishment in India, and any other relevant information.

For the annual return, it should be filed within sixty days of the end of the financial year in Form FC-4, and attachments should include details of promoters, directors, and key managerial personnel and changes from the previous financial year, remuneration details for directors and key managerial personnel, details of meetings of members or classes thereof, board and committee attendance details, details of members and debenture holders, and details of holding, subsidiary, and associate companies and firms. Optional attachments can also be provided, such as details of penalties, punishment, or compounding of offenses, or any other relevant information.

What is the Foreign Company Registration Number (FCRN)?

In India, a Corporate Identity Number (CIN) is used to uniquely identify an Indian company. However, in the case of a foreign company, a Foreign Company Registration Number (FCRN) is used instead. This six-digit number is generated upon approval of eForm FC-1 and serves as a unique identifier for the foreign company.

What is the process for setting up a liaison/branch office in India?

Foreign companies or bodies corporate incorporated outside India, including firms or other associations of individuals, can establish a place of business in India by opening a Liaison Office. However, prior approval from the Reserve Bank of India is required for individuals who are not residents of India. Companies, on the other hand, are exempt from this requirement.

Here are some important differences between setting up a Liaison Office and a Branch Office:

  • Eligibility Criteria:
  • a) For Liaison Office – A track record of profit-making during the immediately preceding three financial years in the home country along with a net worth of not less than USD 50,000 or its equivalent is required.
  • b) For Branch Office – A track record of profit-making during the immediately preceding five financial years in the home country along with a net worth of not less than USD 100,000 or its equivalent is required. Net worth is defined as the total of paid-up capital and free reserves, minus intangible assets as per the account statement certified by a Certified Public Accountant, the latest audited balance sheet, or any registered accounts practitioner.
  • Time Limit for Setup – It generally takes 3-4 months to set up a liaison/branch office, subject to permissions from the Reserve Bank of India.
  • Validity of Tenure:
  • a) For Liaison Office – The validity period of a liaison office is three years, except for NBFCs (Non-Banking Finance Companies) and entities engaged in development and construction sectors, which have a validity period of two years.
  • b) For Branch Office – There is no specific time frame, but generally, it is valid for 2-3 years.
  • Tax Implications: Income Tax & GST

a) Liaison Offices are not subject to Indian income tax as they are not allowed to earn income. Any income generated through business activities in India is taxable under the parent company’s jurisdiction.

b) Branch Offices of foreign companies in India are subject to Indian income tax at a higher introductory rate of 40%, which is inclusive of applicable surcharges and education cess. The actual tax rate ranges from 41.60% to 43.68%, depending on the amount of taxable income.

What is the relevance of DIN?

Director Identification Number (DIN) is not mandatory for directors of foreign companies having Branch Offices in India.

Numerous foreign companies have already registered in India and are setting up their businesses on a large scale by opening Liaison or Branch Offices in the country.

In conclusion, if you’re a foreign company looking to establish your business in India, Ahuja & Ahuja Chartered Accountants can help you navigate the complex legal and regulatory landscape in India. We provide end-to-end solutions, from entity selection to compliance and virtual office services. Contact us today to learn more about our services and how we can help your company establish its presence in India.

Frequently Asked Questions:

What are the charter documents required for a foreign company registering in India?

A foreign company seeking registration in India must submit its charter documents which include its certificate of incorporation, bylaws, statutes, memorandum, articles, and any other document which defines its constitution.

Why is Form FC-1 filed and what is its due date?

Form FC-1 is filed by a foreign company to register its business in India. It must be filed within 30 days of establishing the foreign company’s business in India.

How can I obtain an FCRN for a foreign company?

On successful filing and approval of Form FC-1, the foreign company is provided with a Foreign Company Registration Number (FCRN).

Which form is filed for the annual return of a foreign company, and what is the due date for filing the annual return?

The annual return of a foreign company is filed in Form FC-4, which must be submitted to the registrar of Delhi within 60 days of the closure of the financial year.

In which form is the financial statement of a foreign company filed?

The financial statement of a foreign company is filed in Form FC-3 and must be submitted within 6 months from the last day of the financial year.

How long does it generally take to set up a Liaison Office or Branch Office in India?

For Liaison Office/Branch Office, it generally takes 3-4 months for setup, subject to the permissions from the Reserve Bank of India.

What is the validity period for a Liaison Office and Branch Office in India?

For Liaison Office, the validity period is three years, except in the case of NBFCs (Non-Banking Finance Companies) and those entities engaged in development and construction sectors, which have a validity period of two years only. For Branch Office, there is no specific time frame, but generally, it is 2-3 years.

What is the taxability of Income Tax and GST for Liaison Office and Branch Office in India?

For Liaison Office, there is no income tax as there is no income, and the income is taxable under the hands of the parent company. For Branch Office, foreign companies that have a branch office in India are taxable at the higher introductory rate of 40%, which with applicable surcharge & education cess, results in the rate of either 41.60%, 42.43% & 43.68%.