India’s growing economy, large consumer base and the investor-friendly reforms have made it a top destination for foreign companies seeking to expand and explore their global footprint. With the help of simplified regulatory processes, progressive tax incentives and the robust digital infrastructure, setting up a business in India has become more accessible and approachable than ever before.
This blog provides a comprehensive guide on the foreign company registration in India, including its meaning, types, procedures, compliance requirements and various key benefits.
Understanding Foreign Company Registration in India
As per Section 2(42) of the Companies Act, 2013, a foreign company means any company or body corporate incorporated outside India which-:
- Has a place of business in India (either by itself or through an agent, physically or electronically) and
- Conducts any business activity in India.
When a foreign entity wants to form its presence in India, it needs to get itself registered with the Registrar of Companies (ROC) as per the rules prescribed by the Ministry of Corporate Affairs.
Options for a Foreign Company to Set Up Business in India
Foreign companies can establish their presence in India through two primary routes:
A. Incorporation of an Indian Entity
1. Wholly Owned Subsidiary (WOS)
- 100% foreign ownership is allowed in most sectors under the automatic route.
- The company is treated as an Indian company for all legal and tax purposes.
- Suitable for companies wanting a long-term presence.
2. Joint Venture (JV)
- A foreign company can partner with an Indian company.
- The partnership may be in equity or contractual form.
- Common in sectors where 100% FDI is not allowed.
B. Establishing a Foreign Company Office
1. Liaison Office (LO)
- Acts as a communication channel between the head office and Indian parties.
- Cannot undertake commercial activities or earn income.
- Requires approval from the Reserve Bank of India (RBI).
2. Branch Office (BO)
- Permitted to conduct limited business activities such as export/import of goods, consultancy services, research, and technical support.
- Cannot engage in manufacturing activities directly.
- Also requires RBI approval.
3. Project Office (PO)
- Set up to execute specific projects in India.
- Does not require prior RBI approval if funded through inward remittance or a bilateral/multilateral financing agency.
Eligibility Criteria for Foreign Company Registration
Before initiating the registration process, the following conditions must be met:
- The foreign parent company must need to be legally incorporated and have a valid business license in its home country.
- The company should have a financial track record and needs to meet net worth or the profitability criteria if required by RBI.
- The proposed activities must comply with the various FDI policies and sectoral caps under the automatic or the approval route.
Documents Required for Registration
Here’s a list of commonly required documents for registering a foreign company or its office in India:
- Charter Documents: The Certificate of Incorporation, Memorandum of Association (MOA), Articles of Association (AOA).
- Board Resolution: Authorising the establishment of an office or the incorporation in India.
- Details of Directors/Authorised Representatives: Required documents such as Passport, proof of address and the identification documents.
- Proof of Registered Office Address in India: Rent agreement, utility bill and the owner’s consent.
- Power of Attorney: In favour of a local representative to act on behalf of the company.
- Declaration of Compliance: It needs to be signed by the directors, authorized representatives and professionals (CA/CS).
All foreign-origin documents must be notarised and apostilled in accordance with the Hague Convention.
Procedure for Foreign Company Registration in India
Step 1: Choose Business Structure
Decide that whether you want to set up a subsidiary, joint venture or the representative office.
Step 2: Obtain Digital Signatures (DSC) and Director Identification Numbers (DIN)
Digital signatures are mandatory for the purpose of filing e-forms on the MCA portal.
Step 3: Name Approval
Apply for the company name approval through the RUN, viz., Reserve Unique Name service or the SPICe+ Form on the MCA official portal.
Step 4: Drafting of Incorporation Documents
Need to draft a Memorandum of Association and Articles of Association in accordance with the Indian laws and various FDI norms.
Step 5: Filing of Incorporation Application
Submit Form SPICe+ (INC-32) along with necessary attachments, PAN, TAN and the proof of office address.
Step 6: Approval and the Certificate of Incorporation
Upon the successful verification, the Registrar of Companies (ROC) issues a Certificate of Incorporation.
Step 7: RBI/FEMA Compliance
If you are setting up a Liaison, Branch or Project Office, apply to the RBI through Form FNC under FEMA, 1999…!
Step 8: Post-Incorporation Compliances
- Open a bank account in India.
- Obtain GST registration (if applicable).
- Register with tax authorities and other applicable departments.
Compliances for a Registered Foreign Company
Once registered, foreign companies must adhere to the following regulatory compliances:
- Filing of Financial Statements: In Form FC-3 with the ROC.
- Annual Return: In Form FC-4, detailing company operations in India.
- Intimation of Alterations: Any change in the directors, charter documents or registered office must be filed in Form FC-2.
- Audit and Accounts: Must need to prepare and file the audited financial statements relating to Indian operations.
- Taxation: It is subject to the corporate tax, withholding tax and the transfer pricing regulations (depending on business structure).
Taxation of Foreign Companies in India
Tax rates depend on whether the company is treated as a domestic company (subsidiary) or a foreign company (branch, liaison, project office):
- Domestic Company: Taxed at rates applicable to Indian companies.
- Foreign Company: Taxed at 40% (plus surcharge and cess) on income accrued or received in India.
Benefits of Foreign Company Registration in India
- Access to a Large Market: Over 1.4 billion consumers with increasing purchasing power.
- Ease of Doing Business: It simplifies the online registration and compliance through the MCA and RBI portals.
- Skilled Workforce: India offers a vast pool of educated and English-speaking professionals.
- Investment Incentives: It provides various Tax benefits, startup schemes and government support for foreign investors.
- Strategic Location: India serves as a major hub for accessing the Asia-Pacific and Middle Eastern markets.
Conclusion
Setting up a foreign company in India provides immense opportunities for global enterprises seeking growth in one of the world’s fastest-growing economies. With the proper guidance, transparent procedures and compliance with the Companies Act and FEMA regulations, foreign businesses can smoothly establish and expand or explore their operations in India.
Whether you are planning to set up a liaison office, establish a branch or incorporate a wholly owned subsidiary, India’s evolving business ecosystem provides a strong and rooted foundation for the purpose of long-term success.
