FOREIGN COMPANY REGISTRATION IN INDIA
FOREIGN
COMPANY REGISTRATION IN INDIA
SUBSIDIARY
COMPANY REGISTRATION IN INDIA
WHOLLY
OWNED SUBSIDIARY
Branch Office Vs Subsidiary Company Registration in India
Whenever a foreign company is desirous of
setting up business in India, it has many
options of foreign
company registration in India like
branch office registration, liaison office registration, LLP registration and subsidiary
company registration in India.
In this
write up, we have made a comparison between branch office registration and subsidiary company
registration in India.
What is a Branch Office?
A Branch
Office is a direct expansion of the parent company and it is
engaged in core activities like a head office. It is meant to help
generate revenue for the company and within the particular geographic region or
territorial boundary. However, it is not a separate legal entity from the
parent company or head office. It performs support and implementation-related
tasks without having any individual business identity. The entire expenses
of the BO will be met either out of the funds received from Head Office or
through income generated by it in that particular region or boundary.
What is a subsidiary company?
A
Subsidiary Company is, more complex than a branch office. It is an
entirely separate legal entity that has been established by another company to
do business in a particular place. To become a subsidiary, the head office must
own more than 50 percent of the entity’s voting rights. A wholly-owned subsidiary
is, as the name suggests, is 100% owned by another company. In India, a
Subsidiary is an incorporated entity formed and registered under the Companies
Act, 2013. It is a distinct legal entity, apart from its shareholders and
Parent Company.
What are the major difference between
Branch Office and Subsidiary Company?
Basis |
Branch
Office |
Subsidiary
Company |
Meaning |
It is an
establishment set up by the parent company in India, to perform the same
business operations, at different locations. |
It is understood
as the company whose full or partial (more than 50%) controlling interest is
held by another company. |
Activities which
are permissible |
i.
BOs are allowed
to do following activities by RBI ·
Rendering professional
or consultancy services. ·
Representing
parent company in India & acting as buying / selling agent in India ·
Export/ Import of
goods ( only on wholesale basis) ·
Carrying out
research work in areas in which the parent company is engaged ·
Rendering technical
support to the products supplied by parent/group companies ·
Rendering
services in Information Technology and Development of software in India ·
Representing a
foreign shipping company and Airline |
a) WOS can do any business activities which are prescribed
under its memorandum of association subject to FDI guidelines. b) Indian WOS can be set up subject to FDI guidelines.
Foreign companies can invest in majority of business sectors in India under
automatic route. Only for investment in some sectors and for investment in
excess of specified limit, prior approval of government is required which is
called as government route. |
Activities not
permissible |
BOs cannot
do following activities in India: ·
Construction Development activities ·
Manufacturing and Processing ·
Retail Trading |
There
are some prohibited lists of business in FDI guidelines. It means WOS cannot
be engaged in prohibited business activities. |
Conditions
required for registration |
a)
Foreign company
must be having a profit making track record during immediately preceding 5
financial years in home country. b)
Net worth of
foreign company should not be less than USD 100,000 or its equivalent. |
Minimum
2 shareholders and 2 Directors are required out of which at least 1 Director
shall be Indian Resident and Indian Citizen |
Liability |
The liability of
the Branch is unlimited. |
The liability of
the Parent company is limited. |
Taxation |
If the branch
office is considered as a foreign company, the tax slabs are below:- If earning is more than 10 crores then the tax rate is 43.68% If earning is between 10 crores to 01 crore then
the tax rate is 42.43% If earning is less than 1 crore then the tax rate is 41.60% |
In the case of
Indian Subsidiary the tax slabs are below:- If gross income exceeds 250 Crores then the tax
rate shall be 30% If gross income is up to 250 crores then the tax rate shall be 25% |
Accounts Maintenance |
It has to
maintain either separately or jointly. |
They have to
maintain books of accounts Separately. |
Borrowing |
The Branch Office
is not allowed to borrow from the local market unless the prior approval of
RBI is taken. |
There is no
restriction on local borrowing. External Borrowings are subject to guidelines
issued by the RBI. |
Business Activity |
Branch does the same
business as the parent organization. |
A Subsidiary may do
or may not conduct the same business as a parent organization. |
Registration |
Companies
incorporated outside India engaged in different activities can set up a BO in
India with the approval of RBI. |
It is an
incorporated entity formed and registered under the Companies Act, 2013. |
Authority of
Approving |
Reserve Bank of
India and Ministry of Corporate Affairs |
Ministry of
Corporate Affairs |
Examples |
Banks Branches
(like HDFC, SBI, ICICI, etc.) NBFCs (like JP
Morgan Chase, Muthoot Finance, etc.) |
Titan - Subsidiary
of Tata Group. Jio - Subsidiary
of Reliance Industries. |
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