Foreign Subsidiary in India Registration

Meaning of Foreign Company Subsidiary

• A foreign subsidiary company is one whose majority stakes are held by another company (parent company).
• The subsidiary carries the name, brand identity, or value of the parent company.
• Purpose: Expand the business of the parent company with a separate localized operational structure.
• Funding: Can be wholly owned (100% stakes held by parent) or partially owned (more than 50% stakes held by parent).
• Foreign Company Subsidiaries in India receive funding from their foreign parents, constituting Foreign Direct Investment (FDI).

FDI Limits and Routes for Foreign Subsidiaries

• FDI is generally allowed under the automatic route for most sectors.
• Exception: Countries sharing land borders with India (e.g., Pakistan, Bangladesh, Bhutan, Nepal, China, Afghanistan) require prior approval from the central government for FDI.

Requirements for Setting Up a Foreign Company Subsidiary

1. Minimum Shareholder and Shareholding:
• Must have a minimum of two shareholders.
• Majority shareholder must be the parent company (more than 50% shareholding).
• If parent's shareholding is 100%, two Indian residents must be appointed as nominee shareholders.
2. Minimum Directors:
• Must have at least two directors (up to 15 max).
• At least one director must be an Indian resident.
3. Registered Office:
• Must have a registered office in India.
4. ROC Approved Name:
• Usually, registered with the parent's name suffixed by "India" or an entirely different name.
• Name must be approved by the ROC before incorporation.
5. Document Legalization:
• Documents from foreign origin must be legalized based on country of origin.
• Commonwealth group or Hague Convention countries have specific legalization processes.

Documents Required for Foreign Subsidiary Company Incorporation

1. Holding Company Documents:
• Certificate of incorporation
• Registered address proof in India
• Memorandum of Association
• Articles of Association
• Shareholding and director's details
• Board resolution and power of attorney for the Indian authorized representative.
2. Promoters' Documents:
• Color photo
• Passport (for foreign promoters) and Aadhar (for Indians)
• PAN declaration
• Consent to act as a director (Form DIR2)
• Digital signature of the authorized Indian representative.

Foreign Subsidiary Company Incorporation Process

1. Documentation:
• Prepare and legalize all required documents.
2. Board Resolution:
• Pass a board resolution in the holding company, legalized immediately.
3. Name Approval:
• Apply online on the MCA website with a nominal fee for proposed names.
• Submit legalized board approval.
4. Application for Incorporation:
• Fill out the application online on the MCA website.
• Digitally upload all legalized documents.
• Submit with the required application fee.
5. Verification and Registration:
• ROC verifies details and, upon successful verification, registers the company.
• Issues a certificate of incorporation, providing a legal identity to the subsidiary in India.

Tax Implications for Foreign Subsidiaries in India

• Tax Regime: Combines elements of residential and source-based taxation.
• Income Tax: Subsidiaries are taxed at the regular rate (currently 22%).
• Dividend Distribution Tax: Abolished; dividends taxed in the hands of shareholders.
• Transfer Pricing: Follows arms-length principle to prevent profit shifting.
• Repatriation of Profits: No withholding tax on dividends to foreign shareholders; withholding tax on repatriation of post-tax profits.

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