Do you want to start a company in Bangalore, India?
One can set up a business as a Proprietary concern, Partnership firm, Limited Liability Partnership or Private Limited Company. A foreign company can choose either (a) a subsidiary company or (b) a branch or liaison office.
Key Aspects to Consider
- Taxation
- Repatriation of profits
- Ease of doing business
Branch Office vs Subsidiary Company
| Aspect | Branch Office | Subsidiary Company |
|---|---|---|
| Setup | Requires specific approval of Reserve Bank | Can be set up without RBI approval, no restriction on activities |
| Track Record | Profit-making track record for 5 preceding financial years required | No track record requirement. Min paid-up capital of Rs. 1,00,000 and 2 subscribers |
| Net Worth | Not less than USD 100,000 or equivalent | No such condition |
| Local Representative | Must nominate a local Resident Indian as authorized representative | Must appoint a local director (usually a senior employee) |
| Tax on Income | Taxed as foreign company @ 41.2% or 42.23% | Tax rate is 26% on profits |
| Dividend Tax | Dividend paid to Parent is tax free | Dividend Distribution Tax @ 20.35% applicable |
| Liability | Unlimited; extends to parent company | Limited; does not extend to holding company |
Other Important Points
- Local Director/Partner: As per Companies Act 2013, a local resident Director is mandatory. Many foreign companies appoint a senior employee.
- Physical Presence: No requirement for shareholders to be physically present. Documents can be sent via courier after apostalization or attestation by Indian embassy.
- Foreign Direct Investment (FDI): FDI policy is liberalized and most sectors allow foreign equity participation without specific RBI/Government approval. Some activities remain restricted.
We have been providing consultation and incorporation services to entrepreneurs (both Indian and foreign) over the last 30 years.
Write to us at anubhav@cagaas.in or call 9958147088