What is a Foreign Company in India?

According to Section 2(42) of the Companies Act, 2013 of India, a foreign company is any body corporate or company incorporated outside India that has a business place in India and conducts business activity there. Here, a place of business may include an agent, a physical office, or certain electronic modes of operation.

Eligibility Criteria for Foreign Company Registration in India

For foreign company registration in India, you must meet the following requirements:

• Follow FDI norms via the automatic route (no prior approval from the government) or the government route (ministry approvals).
• One director should be a resident Indian in the company, i.e., stayed in India for 182 or more days in the previous year.
• With valid address proof, maintain a registered office at the time of business incorporation.
• Foreign companies are restricted from engaging in real estate or retail trading activities in India.
• Ensure the business activities comply with MCA and RBI guidelines.

Types of Business Entities for Foreign Companies in India

Foreign companies have five main options. Each has an activity type and a commitment level.

• Wholly-Owned Subsidiary (WOS): It is a separate Indian company owned by the foreign parent.
• Branch Office: Not a separate company; it is an extension of the foreign parent.
• Joint Venture (JV): It is a partnership between a foreign company and an Indian partner. In this, both share risk and ownership, often used when local networks and expertise are needed.
• Project Office: It is a temporary office set up to complete a specific business project in India.
• Liaison Office: It is a representative office of the foreign company that promotes business and builds contacts in India.

Process to Set Up a Foreign Company in India

Here is how to set up a foreign company in India:

• Choose a business structure
• Obtain a digital signature certificate (DSC) and a director identification number (DIN)
• Reserve the name of the company through the MCA portal using the SPICe+ form
• Get licenses and permits
• Open a bank account in India
• Hire employees and other staff members

Advantages to Foreign Companies Setting Up in India

Some of the key advantages for foreign companies planning to set up a company in India include:

• Large Market: India has a growing and wide consumer base.
• Flexible Structures: Options include branch, subsidiary, project, or liaison office.
• Global Trade Links: In international trade networks, India has a strong presence.
• Skilled Talent: Access to professionals in manufacturing, technology, finance, and services.
• Startup and SEZ Benefits: An eligible foreign business may receive compliance and tax incentives.
• Clear Legal System: Entry governed by the FEMA, FDI policy, and Companies Act 2013.

Post-Registration Compliance for Foreign Companies in India

The post-registration compliance for foreign companies in India includes:

• Annual Tax Filings with MCA
  • For Liaison/ Branch/ Project Offices, file Form FC-3 with details of business activities and finances.
  • For Indian subsidiaries, submit MGT-7 for annual returns and AOC-4 for financial statements.
• Tax Compliance
  • Pay TDS, file ITR, and if applicable, maintain GST records.
• FEMA/RBI reporting
  • Submit the Annual Activity Certificate for Project/Branch/Liaison offices through an AD bank.
  • Ensure timely reporting using Form FC-GPR for share allotment and Form FC-TRS for share transfers. For inward remittances, also file the Advance Reporting Form (ARF).