A. Foreign direct investment (FDI)

• An investment made by a company or entity based in one country, into a company or entity based in another country is called foreign direct investment.
• Open economies with skilled workforces and good growth prospects like India tend to attract larger amounts of foreign direct investment than closed, highly regulated economies.
• The investing company may make its overseas investment in a number of ways – either by setting up a subsidiary or associate company in a foreign country, by acquiring shares of an overseas company, or through a merger or joint venture.
• Due to globalization, the importance of FEMA/RBI compliance has increased manifold. It includes chartered accountant’s certification for transactions prescribed in the FEMA/ RBI regulations, making prescribed applications to the Reserve Bank of India for various FEMA and RBI regulated transactions, and advisory services related to FEMA/RBI matters.

Services

• Compliance with FDI regulations and getting regulatory approvals
• Compliance of the procedure including chartered accountants’ certification for repatriation of income/assets from India
• Transfer of shares from Indian resident to non-resident. etc.
• Filing of Form FC-GPR
• Yearly submission of FLA (foreign assets and liabilities) return

B. Outward direct investment (ODI)

ODI is a business strategy where a domestic firm expands its operations to a foreign country either via a green field investment, merger/acquisition and/or expansion of an existing foreign facility either under the automatic route or the approval route as per the RBI guidelines.

Services

• Filing of form ODI duly supported by documents like the certified copy of the board resolution, statutory auditors’ certificate and valuation report, etc.
• Prior approvals from the RBI
• Evaluating the parameters for considering the proposals under the approval route, etc.
• Filing of Form FC-TRS
• Yearly submission of APR (annual performance report)

C. External Commercial Borrowings (ECB)

An external commercial borrowing (ECB) is an instrument used in India to facilitate the access to foreign money by Indian corporations and PSUs (public sector undertakings). ECBs include commercial bank loans, buyers’ credit, suppliers’ credit, securitized instruments such as floating rate notes and fixed rate bonds etc. The DEA (Department of Economic Affairs), Ministry of Finance, Government of India along with the Reserve Bank of India, monitors and regulates ECB guidelines and policies.

Services

• Certification of Form 83 to be submitted to the authorized dealer and RBI.
• Obtaining loan request number and drawing down the same.

A. Liaison Office

A liaison office is a place of business to act as a channel of communication between the principal place of business or head office, by whatever name called and entities in India, but which does not undertake any commercial/trading/industrial activity, directly or indirectly, and maintains itself out of inward. They can’t perform or take up activities to earn income in India and their expenses are to be met using the foreign inward remittance made by the parent company.

B. Project Office

A project management office, is a group or department within a business, agency or enterprise that defines and maintains standards for project management within the organization. However, their existence is subject to the time required for completion of the project. They have certain compliances which need to be followed.

Branch Office

A branch office is a location, other than the main office, where business is conducted. A Branch can be opened for a specific purpose. But, it should be engaged in the same activities as that of the parent company. Incorporating a branch office involves a lot of compliances from regulatory authorities.

Services

• DGFT & STPI
• IEC application
• Bank realization certificate
• SEIS (Services Export from India Scheme) application
• STPI filings
• State government
• Registration under TG Shops and Establishments Act
• Labour license
• Trade license
• FCRA (Ministry of Home Affairs)
• FCRA Filings

Prior to investing in India, companies must know how to repatriate their profits from the country of investment. Though sending company profits from India is much simpler than remitting personal income, the procedures to remit money to the parent company depend upon an entity’s investment model.

Typically, foreign companies in India operate through either a liaison office, project office, branch office or wholly owned subsidiary (WOS).

A. Remitting from Branch Offices:

All investments and profits earned by branches of a foreign company are repatriable after taxes are paid. There are, however, two uncommon exceptions to this; first, certain sectors such as defense are subject to special conditions. For these sectors, there is a lock-in period where companies have to wait for permission to be granted by the Indian government. The second exception is only when non-resident Indians (NRIs) specifically choose to invest under non-repatriable schemes.

Besides profits, remittances of winding-up proceeds of a branch office are also permitted under the Indian law. They are subject to prescribed procedures and require the submission of certain documents.

B. Remitting from Wholly Owned Subsidiaries:

Wholly owned subsidiaries in India have independent legal status distinct from the parent foreign company. Foreign entities with long-term business objectives often choose to establish their presence with a WOS because it provides longevity, flexibility and a stronger legal foundation for doing business in India.

The two ways of sending profits from a WOS in India are:

• Payout of profits as dividends; and
• Buyback of shares by the company.

Dividends are freely repatriable without any restrictions as long as taxes are paid, notably Dividend Distribution Tax (DDT). Tax credit and/or tax relief is not applicable for DDT or for repatriation of dividends. Companies do not require permission from the RBI, but the remittance must be made through an authorized dealer.

Secondly, profits can be repatriated in the middle of the year with interim dividends after the DDT is paid. However, if using interim dividends, the company must have enough book profits to pay the dividend and enough money to pay taxes in India.

Profit can also be repatriated along with capital through buyback of shares as long as a buyback tax of 20 percent is paid on profits distributed by companies to shareholders.

The tax is not applicable if the company concerned is a publicly listed company or a subsidiary of a publicly listed company.

Services

• Filing of application for repatriation of Funds with respective authorities/AD
• Preparation of required documentation and obtain necessary certificates from respective persons