With lowest operating cost, cheap labour and special economic zones with tax exempt status, India has become a lucrative destination for foreign entities to set up their business. Government of India’s policy regime and positive business environment has also added to the existing factors.
Features
making India one of the favorite offshore jurisdictions for incorporation
- World's largest democracy with 1.2 billion people.
- Stable political environment and responsive administrative set up.
- Well established judiciary to enforce rule of law.
- Land of abundant natural resources and diverse climatic conditions.
- India's growth will start to outpace China's within three to five years and hence will become the fastest large economy with 9-10 per cent growth over the next 20-25 years
- Investor friendly policies and incentive based schemes.
Advantages
of Incorporating in India
Incorporation in India
offers certain advantages to a company as compared to other countries.
- Business operating costs are low in India because an Indian LLC can be formed with a low paid up share capital. The average monthly salary of the staff in India is much lower compared other countries according to the International Labor Organization. Average energy costs are also low in India at 8 cents per Kw-hour, compared to western countries where the costs can be higher than 20 percents. India’s annual rental costs for office space are also comparatively lower. India has amongst the lowest consumer cost index in the world. Consequently, foreign entrepreneurs will find it easier to establish an India business set up.
- India is an excellent country to set up a manufacturing company because setting up a manufacturing unit in one of India’s 170 Special Economic Zones allows the firm to be tax exempt for the first 5 years, 50% tax exempt in the next 5 and 50% tax exempt on re-invested export profit for next 5 years. The Indian Government offers several incentives for manufacturing firms including tax holidays for upto 5 years for companies undertaking infrastructure projects and power projects; funding for approved R&D projects and power projects; funding for approved R&D projects and tax credit and insurance guarantees for export-oriented companies.
- India has the world’s second largest labour market with 487 million people. The overall literacy rate is also very high and further more a massive supply of unskilled labor force is also available who work at a lower average monthly wage rate. Warehouse/factory rental costs are very low in the country.
- Also India has a massive consumer market with a huge domestic demand. So, it is essential for foreign entrepreneurs to incorporate in the country to harness this demand. India company incorporation allows entrepreneurs to market their produce to other huge markets including China, Australia, Malaysia and Indonesia with whom India has significant trade ties.
- Foreign investors should establish a services company in India because India has an oversupply of educated labor. Every year, India produces around 3 million engineering and doctoral graduates which is more than USA and China combined. Consequently, foreign entrepreneurs should set up in India to take advantage of the highly skilled work force.
- Not only that, English being the primary business language, is it easier for foreign investors to interact with consumers, suppliers and employees. India is the best South Asian country for getting business credit. This will help foreign entrepreneurs in expanding their business operations in the country. Consumer demand, both domestically and globally, for Indian services industry is very high. For example, India leads the world in offshore Business Process Outsourcing and IT Outsourcing. So India will be a highly advantageous base of operations for any service business set up.
- More over Indian Government offers monetary incentives to encourage local firms to access the foreign market. Funding is provided to companies who wish to market their products in international trade shows and fairs. Incentives are also available at the state level for IT firms. For example firms which provide IT related services to help under-developed states move towards e-governance will receive 100% tax credits.
Entry routes for foreign start ups in India
There
are various forms of business structures available in India. They are Pvt Ltd
Company, Public Limited Company, LLP, Partnership, sole proprietorship, Sec 25
companies and Trust.
Business
can be organized in one of the several ways, and the form its owners choose
will affect the companies and owners' legal liability and income tax treatment.
Out of that, company form of organization is the most common incorporated
business structure in India. The company registration in India is regulated by
the Companies Act, 1956, and administered by the Ministry of Corporate Affairs
through offices of the Registrar of Companies (ROC) in each state.
But when it comes to a foreign entity, business presence in
India may be established through:
(i)
As an
incorporated entity under the Companies Act 1956 through JVs or wholly owned
subsidiaries
(ii)
As an unincorporated entity
through liaison office/representative office or project office or branch office
of a foreign company. Such offices can undertake activities permitted under the
Foreign Exchange Management (establishment in India of branch office of other
place of business) Regulations 2000.
SETTING
UP LIAISON – REPRESENTATIVE – BRANCH – PROJECT OFFICE
Liaison Office
/Representative Office
A
foreign company may open a liaison office in India to promote its business
interest, spread awareness of its products, explore further opportunities and
act as a communication channel between itself and various Indian companies. A
Liaison Office could be established with the approval of Reserve Bank of India.
The role of Liaison Office is limited to collection of information, promotion
of exports/imports and facilitates technical/financial collaborations. It is
required to maintain itself out of inward remittances received from abroad through
normal banking channels. Liaison office cannot undertake any commercial
activity directly or indirectly. Permission for such offices is initially
granted for a period of three years and may be extended from time to time.
Applications for renewal of permission are required to be made to the concerned
regional office of Reserve Bank under whose jurisdiction the office is
situated.
Project
Office
Foreign
companies planning to execute specific projects in India can set up temporary
project/site offices in India for carrying out activities only relating to that
project. RBI has now granted general permission to foreign entities to
establish project offices subject to specified conditions
Branch
Office
Foreign
companies engaged in manufacturing and trading activities abroad are allowed to
set up branch offices in India for the purposes of export/import of goods,
rendering professional or consultancies services, R&D, promoting technical
or financial collaborations, representing the parent company, acting as buying/selling
agents, rendering services in IT and development of software, rendering
technical support to the products supplied by the parent/group companies,
foreign airline/shipping companies. Branch offices could be established with
the approval of RBI and may remit outside India profit of the branch, subject
to RBI guidelines after payment of applicable Indian taxes.
To learn more about incorporation in the
Bahamas or any other offshore jurisdiction, please follow the link below - See
more at: http://globalcompanyformation.co.uk/
Global Company Formation UK Ltd
Suit 6-Westward House
Glebeland Road Camberley
Surrey, GU15 3DB
Tel: 02079935929
E :info@globalcompanyformation.co.uk
W :www.globalcompanyformation.co.uk
Welcome
to Global Company Formation
We offer formation advice to start up business
globally. We advise you of the mode of start up like limited company,
partnership, sole trader, trust and which is more suitable to your business.
Our professional team consists of Lawyers, Chartered Accountants & Business
Consultants in all major jurisdictions across the globe. We guide you to the
country of formation on the basis your domicile status, double taxation
agreement, international plan and repatriation rule of the each country. Now
you can form your business anywhere in the world with us and we care your
business.
Mathew Stephen
FCA, AAIA, CeFA
Mathew Stephen is the founder Director of
Global Accountancy Services. He is a qualified accountant from the Association
of International Accountants in the UK and the Institute of Chartered
Accountants of India. He is also one of the partners of international Chartered
Accountants firm P. Parikh & Associates. He has 20 years’ experience in
accounts, business consultancy, taxation & statutory audit. He is also a UK
Independent Financial Advisor (IFA) and CeFA qualified at the IFS School of
Finance.
He has won the Online Technology Award in two
consecutive years, 2011 and 2012, from the Tenet Network. He specialises in
Global Company Formation, International Taxation and also as Corporate
Protection Advisor to the directors of Limited Companies.
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