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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 www.ebtc.eu
Building Access for “Waste-Water Management” Companies 61 EU companies to meticulously follow procedures to systematically set-up India operations Government has laid down a systematic procedure for setting up a company in India. Steps to be undertaken to start new business operations Obtaining approval for the proposed name of the company from the ROC Drawing up the Memorandum of Association Drawing up the Articles of Association Getting the appropriate persons to subscribe to the Memorandum (a minimum of 7 for a public company and 2 for a private company) Payment of registration fee to the ROC Receipt of Certificate of Incorporation Obtain a certificate of commencement of business from the ROC in case of a public company Figure 7: Flowchart highlighting steps to be incorporated while setting up new office in India DIPP www.ebtc.eu
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