Wholly Owned Subsidiary Branch Office

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Wholly Owned Subsidiary Branch Office

When a foreign company plans to establish an Indian business, it is easy to confuse a Wholly Owned Subsidiary or WOS and a Branch Office. This page describes the differences between a Branch company and a Subsidiary Company. A foreign company created it.

Diverse Options Available for Foreign Corporations

Subsidiary Wholly Owned Ideal for operations of large-scale and long-term presence in India. It is comparable to any Indian Company. Ideal and Only Choice in the case of manufacturing activity with low taxes

Branch Office To establish Brand India. It is a foreign entity subject to a 40% greater tax rate. A branch office can't do manufacturing activities and is tightly regulated.

Liaison Office A LO cannot generate income in India unless they have explored the market and created Brand Awareness. The parent must finance all expenses for LO.

Branch Office To complete one or several projects granted to foreign corporate by the Indian Private Sector or government. The income of the PO can be taxable at 40%, plus Cess & Surcharge.

Project Office

India is an attractive destination for expanding foreign businesses for obvious reasons. India is a tax-friendly place to do business. There are a sizeable middle class and young population. These are two of the most popular options for foreign companies. The following sections discuss the differences between a Wholly Owned Subsidiary (and Branch Office).

The wholly-owned subsidiary: A Company registered in India under the 2013 Companies Act is a company whose equity shares comprise 100%. This foreign corporation must meet the sectoral cap. WOS can be considered a distinct legal entity independent of the existence of foreign companies. It is treated as an Indian company in all law and tax aspects.

Branch Office: Companies established outside India are allowed to set up Branch Offices subject to approval by the RBI. A Branch office, also known as a Foreign Entity, is subject to a higher tariff (40%), more effective regulations and more control by Indian authorities. The RBI and Registrar of Companies are the regulators for the Branch offices.

Note: Although a wholly owned subsidiary can carry out any business activity, a Branch Office cannot directly or indirectly perform manufacturing or processing operations in India.

Subsidiary Company
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The Companies Act, 2013, which regulates how a company can be incorporated in India.
The Rules of the above Act.
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Branch Office
The Companies Act, 2013, which prescribes the process for incorporation of an Indian company.
The Rules Framed Under the Companies Act.
2000. Foreign Exchange Management (Establishment of an Office or Branch in India) Regulations.
Foreign Exchange Management Act
RBI issues Circulars, Notifications

Wholly Owned Subsidiary: Since it is an Indian company, it can engage in all business activities within the Indian FDI sectoral boundaries. However, it must comply with the MOA's main object.

Permitted Activities of Branch Office: A Branch Office for a foreign corporation can typically perform the activity in the same way as its parent company. It can't engage in manufacturing or other processing activities in India directly or indirectly. The following are permitted activities.

  • Export and import of goods
  • Consulting or professional services rendered.
  • Research in the fields of interest to the parent company.
  • We are promoting technical and financial collaborations among Indian companies and a parent or foreign group company.
  • Represent parent company in India. Act as Indian buyer/seller agent.
  • India, Information Technology and Software Development Services.
  • We are supporting the products of parent/group companies by providing technical assistance.
  • Company those ships to/from foreign countries
Subsidiary Company
The minimum number of subscribers and directors required to register a Private Limited Company shall be two. At least one director must reside in India.
Resident refers to a stay lasting 182 days or longer in the preceding financial calendar.
There are no minimum and maximum requirements for capital induction.
It does not matter if the parent company has a good track record.
Branch Office
The Companies Act, 2013, which prescribes the process for incorporation of an Indian company.
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Parent Company shall be able to demonstrate a profitable track record during the five prior financial years in their home country.
The net worth of the Parent Company cannot be less than USD 100,000.
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Affiliate Company: Companies are governed by the provisions and rules of the companies act. The MOA and AOA, which are internal documents, define and limit both the authority of a board and the company's powers. A private limited company must maintain at least two directors, while a public limited requires three.

The number of investors in a confidential, restricted organization can't surpass 200. Private limited companies must always have at least two shareholders. The private limited company cannot invite the public for shares or debentures. It is also forbidden to accept deposits from any other than its directors, members or relatives. Until the company closes its doors, the company is still in existence.

Branch Office Approval for a Branch Office is valid for three years after approval. Extensions are possible; terms of approval are as below.

S.No.   Terms of Approval
1   RBI expressly prohibits the expansion of its activities or any new commercial, industrial, or trading activity.
2   The Branch Office expenses for India will be covered by funds received through normal banking channels from the head offices or income generated in India.
3   The Branch Office does not accept deposits from India.
4   The Branch Office's commission from overseas parties to any agency business will be repatriated through the normal banking channels to India.
5   It is forbidden to engage in retail trade.
6   A branch office is not permitted to directly or in part, performs manufacturing or other processing activities in India.

Various Labour Law Registers

A foreign firm's WOS or Branch office must comply with the same set o tax and labour laws. This table lists the registrations that can be used in both cases.

Subsidiary Company
Indian Company Registration
PAN / TAN information for the Company
Registration of Shops and Establishment Act
Professional Tax Registration
Import Export Code
GST
Trade License, or Factory License
Branch Office
Approval from RBI
Indian Company Registration
Register with the Local Police
PAN / TAN information for the Company
Registering Shops and Establishment Act
Professional Tax Registration, Import Export Code
GST, Trade License, or Factory License

Various Labour Law and Tax Registrations

The branch office and the subsidiary business are subject to the same indirect taxes (GST) for the supply of goods and services and withholding tax provisions. The Branch Office's income tax rates, however, are higher. The following table summarizes all relevant tax provisions.

Particulars Subsidiary Company Branch Office
Rate of income tax For manufacturing companies, the tax on income is 15%. It is 22% for all other categories. A nominal cess, and surcharge are applied to the tax amount. Foreign corporations are subject to a 40% income tax. A surcharge and the cess are also applicable.
Tax on Dividend Dividend Distribution tax- NIL Royalty/technical fees- As per DTAA Profits can be freely returned to the Parent Company, but the Parent Company must pay applicable taxes according to the Indian Income tax Act.
GST GST Rates range from 1% - 28% GST paid for inputs is possible to be claimed -
S.No.   Terms of Approval
1   RBI expressly prohibits the expansion of its activities or any new commercial, industrial, or trading activity.
2   The Branch Office expenses for India will be covered by funds received through normal banking channels from the head offices or income generated in India.
3   The Branch Office does not accept deposits from India.
4   The Branch Office's commission from overseas parties to any agency business will be repatriated through the normal banking channels to India.
5   It is forbidden to engage in retail trade.
6   A branch office is not permitted to directly or in part, performs manufacturing or other processing activities in India.

Various Labour Law and Tax Registrations

The branch office and the subsidiary business are subject to the same indirect taxes (GST) for the supply of goods and services and withholding tax provisions. The Branch Office's income tax rates, however, are higher. The following table summarizes all relevant tax provisions.

Subsidiary Company
1,   Reporting Foreign Direct Investment to RBI (FC–GPR).
2.   Annual Return on Foreign Liabilities & Assets (FLA).
Branch Office
1.   ROC Yearly Reports from BO and World Accounts
2.   Annual Activity Reporting to RBI Through AD
S.NO. Type of Compliance What to do when?
1 GST Payment (Return on GSTR-3B). Monthly
3 GST Return Monthly, Quarterly or Annual
3 TDS Payment 7th of the next month
4 TDS Return Quarterly
5 PF and ESIC payment & return Monthly
6 Professional Tax Payments & Returns Monthly
7 Statutory Audit Annual
8 Annual Income Tax Return Annual
9 Annual Return to ROC Annual
Particulars Subsidiary Company Branch Office
Management They are managed by the board. A minimum of two directors are required to be on the board. The Indian Resident Person should be the first, and any other director can be of foreign origin. BO is managed and administered by an Authorized Representative, residing in India (Country manager).
Audit Financials will be subject to Statutory Audition by Chartered Accountants. Subject to some conditions, Internal audit as well as Tax audit is also available. Financials could be subject to Statutory audit by Chartered Accountants. Tax audits may also apply, but they are subject to certain terms.
Remittances of profits to parent company Dividends - There is no tax on dividend distribution Royalty/ fees to pay for technical services Management Fees Transfer pricing Regulations govern transactions between related parties Profits can be free repatriated back to the Parent Company provided they pay applicable taxes and remit funds to India within the guidelines of FEMA.
Borrowing Local borrowings can be authorized subject to the 2013 Companies Act guidelines The RBI will issue guidelines to guide external commercial borrowings. The Branch Office cannot borrow locally without prior approval by RBI
Permitted Incomes All income earned from its business activities. All expenses of the BO India will be covered either by funds received from Head Office via normal banking channels, or through income that it generates in India.
Liabilities Of Parent Company/Head Office The liability of the Parent Company is limited to the amount of its WOS shares. The attachments do not affect the assets of the foreign firm The liability for the Branch is uncapped. If the liabilities exceed the assets, the parent company's assets could be subject to attachment
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Wholly Owned Subsidiary Branch Office We assist foreign companies in thriving in India. All India Tax Registration & Returns Wholly Owned Subsidiary Branch Office When a foreign company plans to establish an Indian business, it is easy to confuse a Wholly Owned Subsidiary or WOS and a Branch Office. This page describes the differences between a Branch company and a Subsidiary Company. A foreign company created it.

Pricing Summary
Quantity : 1 Year
Market Price : ₹11899
DobizIndiaFilings : ₹8389 excl. GST
  ₹9899 incl. GST
GST Credit : ₹1510
You Save : ₹3510 (29%)

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Applied for startup recognition certificate, work done in scheduled time with good coordination of teamThank u

Meera Sharma

Applied for startup recognition certificate, work done in scheduled time with good coordination of teamThank u

Meera Sharma

Applied for startup recognition certificate, work done in scheduled time with good coordination of teamThank u

Meera Sharma

Applied for startup recognition certificate, work done in scheduled time with good coordination of teamThank u

Meera Sharma

Applied for startup recognition certificate, work done in scheduled time with good coordination of teamThank u

Meera Sharma

Applied for startup recognition certificate, work done in scheduled time with good coordination of teamThank u

Meera Sharma

Applied for startup recognition certificate, work done in scheduled time with good coordination of teamThank u

Meera Sharma

Applied for startup recognition certificate, work done in scheduled time with good coordination of teamThank u

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