DOING BUSINESS & WORKING IN INDIA

Transcription

1 DOING BUSINESS & WORKING IN INDIA CHENNAI BANGALORE COIMBATORE HYDERABAD INTELLECTUAL PROPERTY CORPORATE LEGAL

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3 CONTENTS 1. Introduction Available Structures For Testing the Waters Business Structures Available in india Sectors where FDI is permitted under automatic route Investment through Government Route Company under the Companies Act, Indian Visa Employment Visa TAX Note to Guide

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5 1. INTRODUCTION India being world s third largest economy, offers great economic and financial prospects to potential Investors. The high potential of the Indian market driven by an emerging middle class, cost competitiveness and a huge pool of talent makes it one of the most attractive investment destinations. The Foreign Direct Investment (FDI) regime has been progressively liberalized, with most restrictions on foreign investment being removed and procedures simplified. With limited exceptions, foreigners can invest directly in India, either on their own or as a joint venture. Recent global developments have demonstrated that India s strong fundamentals and robust domestic consumption levels make it a resilient economy that can withstand global economic slowdown and declining consumption levels. This booklet introduces the basic legal regime regarding the conduct of business in India and answers questions and issues commonly raised by overseas investors. It is intended to act as a broad legal guide to aid your decision making process when deciding to start and carry on operations in India. However, it should not be used as a legal opinion on any specific matter. The laws discussed here are subject to change and the regulatory environment in India is dynamic, therefore we would recommend that you please contact us if you would like to invest in India or expand your operations in India. We would be happy to assist you. 5

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7 2. STRUCTURES FOR TESTING WATERS A foreign company not opting to be incorporated in India is permitted to conduct its business operations in India through any of the following offices: Liaison Office Branch Office Project Office Such offices can only undertake activities permitted to them under the Regulations framed by FEMA for such offices. These offices are further required to be in compliance with provisions of the Companies Act as applicable to them. The approvals for these offices are accorded by the RBI on a case-to-case basis, except project offices for which the RBI has granted a general permission. 1. Liaison Office (or Representative Office): A Liaison Office means a place of business to act as a channel of communication between the principal place of business or head office and entities in India but which does not undertake any commercial / trading / industrial activity, directly or indirectly. A liaison office is not permitted to undertake any business activity in India and cannot earn any income in India and therefore is required to maintain itself out of inward remittances received from the head office outside India. 2. Branch Office: Foreign entities engaged in manufacturing or trading activities outside India are allowed to set-up a Branch Office in India. The profits of a branch office are permitted to be remitted outside India subject to the payment of applicable Indian taxes. A branch office is not permitted to engage in any manufacturing or processing activities in India directly or indirectly. Retail trading activities of any nature are also not allowed for a branch office in India. 3. Project Office: A Project Office means a place of business established to represent the interests of a foreign company executing a project in India. Such offices are prohibited from undertaking or carrying on any activity other than the activity relating and incidental to the execution of the project for which such office is established. 7

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9 3. BUSINESS STRUCTURES IN INDIA 1. General business structures available in India are as follows: 1.1. Private Limited Company 1.2. Public Limited Company 1.3. Limited Liability Partnership 2. Other forms of business organizations like proprietary firm, partnership firm, trust etc. are either not permitted or not advised for foreigners wanting to do business in India. 9

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11 4. FDI UNDER AUTOMATIC ROUTE Government of India has put in place a policy framework on Foreign Direct Investment (FDI). This framework is embodied in the Circular on Consolidated FDI Policy. The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry, Government of India makes policy pronouncements on FDI through Press Notes/ Press Releases. The procedural instructions are issued by the Reserve Bank of India vide A.P. Dir. (series) Circulars. The regulatory framework, over a period of time, thus, consists of Acts, Regulations, Press Notes, Press Releases, Clarifications, etc. Thai citizens or companies can make investments in shares or debentures of an Indian company, through either the Automatic Route or the Government Route. Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from Government of India for the investment. Under the Government Route, prior approval of the Government of India is required. Proposals for foreign investment under Government route are considered by FIPB (Foreign Investment Promotion Board). The following sectors are classified as Prohibited Sectors. Foreigners are not permitted to invest in these sectors, directly or indirectly: a) Lottery Business including Government /private lottery, online lotteries, etc. b) Gambling and Betting including casinos etc. c) Chit funds d) Nidhi company e) Trading in Transferable Development Rights (TDRs) f) Real Estate Business or Construction of Farm Houses g) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco h) substitutes i) Activities / sectors not open to private sector investment e.g. Atomic Energy and Railway Transport (other than permitted activities). j) Foreign Technology collaboration in any form for Lottery Business and Gambling and Betting activities (including licensing for franchise, trademark, brand name, management contract) 11

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13 5. INVESTMENT - GOVERNMENT ROUTE Foreigners are allowed to invest through Government Route in the following sectors subject to caps on investments and other conditions imposed in the FDI Policy: Tea Plantation Mining and mineral separation of titanium bearing minerals & ores Petroleum refining by Public Sector Undertakings Manufacture of items reserved for production in Micro and Small Enterprises (MSEs) by a unit which is not a MSE Defense Industry and Print Media Broadcasting including Teleports, Mobile TV, FM (FM Radio), Cable Network, Direct to-home, Headend-In-The-Sky (HITS) Broadcasting Service, Setting up hardware facilities such as up-linking, HUB etc. (Automatic in some cases up to 49%) Airports - Existing projects (Automatic up to 74%) Non-Scheduled Air Transport Service (Automatic up to 49%) Ground Handling Services under Civil Aviation sector (Automatic up to 49%) Satellites Establishment and operation Private Security Agencies Telecom services including Internet Service Provider and Infrastructure provider Providing dark fibre, right of way, duct space, tower etc. (Automatic up to 49%) Single Brand product retail trading Multi Brand Retail Trading (permitted in a few states only) Banking and Financial Services including banks, Non-Banking Financial Services, Commodity Exchanges, Asset Reconstruction Companies, Credit Information Companies, Infrastructure Company in Securities Market and Insurance Power Exchanges. In other words, if the activity that you have in mind is not mentioned above, then it is open for investment without need for any approval or permission from any authority. All that you need to do is to bring the money in India through the normal banking channels and reporting though authorized bank. It will however, be advisable to check if there are any specific conditions or caps on investments in the sector that you are planning to enter before you move your investments. 13

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15 6. COMPANY UNDER THE COMPANIES ACT, Meaning of a Company: Company, under the Companies Act 2013 is a juristic person having a separate legal entity distinct from the members who constitute it, capable of rights and duties of its own and endowed with the potential of perpetual succession. 6.2 Types of Companies: Private Limited Company: A private limited company must have at least two shareholders and can have maximum two hundred shareholders. A private company must have a minimum paid-up capital of Rs. 100,000/ Public Limited Company: A public company must have at least seven shareholders. There is no upper limit on number of shareholders of a public company. A public company must have a minimum paid-up capital of Rs. 500,000/- 6.3 Appointment of a Foreign Director: A foreigner can act as Director of an Indian company. No permissions are needed for this. It is possible to have a company with only foreign citizens as directors. However, section 149(3) of the Companies Act, 2013 makes it mandatory for every company to have a Director who has stayed in India for a total period of at least 182 days in the previous calendar year. It may be noted that such a resident Director need not be a citizen of India A foreign citizen appointed as Director of an Indian company may live abroad. In other words, he / she need not be resident of India. He / she may conduct the business of the company while living abroad. 6.4 Shareholders: If the shareholders of the company are foreign citizens, they should bring their contribution to share capital by transfer from their foreign bank account through normal banking channel. 6.5 Board of Directors: Board of Directors is required to meet at least once in every three months. Under sec. 173 of the Companies Act, 2013, the Board must meet at least four times in every year with not more than 120 days between two meetings. Meetings of Board of Directors can be held anywhere in the world. Under section 173(2) of the Companies Act, 2013 a Director may participate in a meeting of Board of Directors either in person or through video conferencing. 6.6 Corporate Tax: The tax imposed on a company's income is known as corporate tax and it depends on its domicile. Indian companies are taxable in India on their worldwide income. Foreign companies are taxable on income that arises out of their operations in India and in certain cases, income that is deemed to arise in India. 15

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17 7. INDIAN VISA An Indian company can employ foreign citizens in India as well as outside India. No permissions are needed for this. However, the foreign citizen needs an employment visa if he / she intend to reside in India. Types of Visa Offered by the Indian Government 1. Business Visa 2. Employment Visa Thai nationals including their family members who intend to stay in India for more than 180 days or have visa for more than 180 days, have to get themselves registered with the Foreigners Regional Registration Office (FRRO) within 2 weeks of their first arrival in India. For the purposes of registration, the persons are required to make an application in the prescribed form and be present in person at the time of registration. The following documents are required to be submitted along with application: a) Application form in quadruplicate (Form A) b) Passport and visa in original c) 4 passport size photographs d) Proof of residence in India e) Copy of employment contract and undertakings by the employer Once the FRRO is satisfied about the above documents, a Residential permit to stay in India is issued to the foreign national. 17

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19 8. EMPLOYMENT VISA An Employment Visa is granted to foreigners desiring to come to India for the purpose of employment, subject to fulfillment of the following conditions: 1. The applicant is a highly skilled and/or qualified professional, who is being engaged or appointed by a company in India on contract or employment basis. 2. Employment Visa shall not be granted for jobs for which qualified Indians are available. Employment Visa shall also not be granted for routine, ordinary or secretarial / clerical jobs. 3. The foreign national seeks to visit India for employment in a company registered in India or for employment in a foreign company engaged for execution of some project in India. 4. The foreign national being sponsored for an Employment Visa in any sector should draw a salary in excess of USD 25,000 per annum. There are a few exceptions to this limit. The exceptions are generally speaking not relevant for business. 5. The foreign national must comply with all legal requirements like payment of tax liabilities etc. 6. The Employment Visa must be issued from the country of origin or from the country of domicile of the foreigner provided the period of permanent residence of the applicant in that particular country is more than 2 years. 19

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21 9. TAX 9.1 Scope of Taxation: If an individual is resident and ordinarily resident, worldwide income of the individual is liable to tax in India If an individual is resident but not ordinarily resident, income received in India or accruing/arising from a source in India or income derived from a business controlled or profession set up in India is liable to tax in India If an individual is considered non-resident, income received in India or accruing/arising from a source in India is liable to tax in India. 9.2 Determination of Residential Status: Residential status of an individual can be classified as under: Resident in India: Resident and ordinarily resident (ROR) and Resident but not ordinarily resident (RNOR) Non-resident in India (NRI): An individual is treated as Resident in India if any one of the following conditions is satisfied: Individual s stay in India is 182 days or more in any tax year; OR Individual s stay in India is 60 days or more in the relevant tax year and 365 days or more in aggregate in the 4 tax years immediately preceding the tax year for which residential status is determined If none of the above conditions is fulfilled, the individual is treated as NRI. It is not essential for the stay in India to be continuous or at the same place A resident individual is treated as RNOR in India if he satisfies any one of the following conditions: The individual is NRI in India in at least 9 out of 10 tax years preceding the tax year for which residential status is determined; OR The individual is physically present in India for 729 days or less during 7 tax years preceding the tax year for which residential status is determined A resident individual not satisfying both the conditions mentioned above [(i) and (ii)] is treated as ROR. 9.3 REGISTRATION WITH INCOME TAX AUTHORITIES: Employees are required to seek tax registration (Permanent Account Number) with the Indian Income tax authorities upon their arrival in India. 9.4 TAX CLEARANCE: At the time of departure from India, employee is required to furnish to the Income tax authorities, an undertaking from the employer to the effect that the tax payable by employee shall be paid by employer. On the basis of said undertaking income tax authority will grant a No Objection Certificate to the employee to leave India. 21

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23 10. NOTE TO GUIDE This guide is intended to provide Thai investors and their advisors a broad legal perspective on doing business in India. The guide is written in general terms and its application to specific situations will depend on the particular circumstances involved. Readers should obtain their own professional advice and this guide should not be seen as replacing the need to seek such specific legal advice. Neither Altacit Global nor any of its partners, associates or employees involved in the preparation of this guide make any representation or warranty in relation to the subject matter contained herein. None of them shall in any way be responsible for any actions taken or not taken as a result of relying on this guide or using the information contained in any way and in no event shall be liable for any loss or damages resulting from reliance on or use of such information. 23

24 INTELLECTUAL PROPERTY CORPORATE LEGAL CHENNAI Creative Enclave, III Floor, # , Luz Church Road, Mylapore, Chennai, India Phone: / Tele Fax: info@altacit.com BANGALORE Suite 920, Level 9, Raheja Towers, #26-27, Mahatma Gandhi Road, Bangalore, India Phone: Tele Fax: bangalore@altacit.com COIMBATORE #1533, Trichy Road, (Next to Richmond Hospital) Coimbatore, India Phone: Tele Fax: coimbatore@altacit.com HYDERABAD Suite 132 & 133,Level 1, Midtown, Road No 1, Banjara Hills, Hyderabad INDIA. Tel: Fax: hyderabad@altacit.com 24