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60
India-EU: Creating Market Alliances
Select appropriate entry strategy to effectively penetrate the Indian markets
The following table provides a Comparative Analysis of the various
entry options available and the formalities / procedures to be adhered
to.
Comparative Summary of Entry Options in India
Particulars
Liaison Office
Project Office /
Branch Office
Subsidiary / Joint Venture
Prior approval of RBI for
Setting up
Yes
Yes, except SEZs
(Exempted on
fulfilment of certain
conditions)
GOI / FIPB Approval(Not for
automotive route) and
thereafter compliance with
post facto filings required
Liaison / representation /
communication Activities
Permitted
Yes
RBI permitted activity
allowed
Yes as specified in the
memorandum of association of
the company
Commercial Activities
Permitted
Yes
Manufacturing, (except
SEZ units) not
permitted
Yes, subject to FDI guidelines
Funding of local
operations met through
inward remittances
Yes
Yes
Through equity or other forms
of permitted capital infusion or
borrowings or internal accruals
Unlimited liability Yes Yes
Liability limited to the equity
participation in the Indian
company
Periodical Compliance
requirements under
Companies Act
Yes
Yes
Yes (Higher statutory
compliance)
Annual Compliance
certificate under foreign
exchange management
regulations
Yes
Yes
Yes (Periodic filings also
required)
Compliance requirements
under IT Act
No tax liability
Tax on income earned;
No tax on repatriation
of profits
Liable to be taxed on global
income on a net basis
Dividend declared freely
remittable but subject to
distribution tax of 16.9%
Permanent Establishment
(PE)
LOs generally not
having PE / taxable
presence under
Double Taxation
Avoidance
Agreements (DTAA)
due to limited scope
of activities in India
Generally constituting
a PE and being a
taxable presence
under DTAA and
domestic IT provisions
An independent taxable entity
and not a PE of the PE of the
foreign company unless it is
subject to the provisions of the
DTAA
Investing in India
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