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Incorporation Fees - from £1,975 Renewal Fees - from £1,550 £ 1,975

• It is strategically located and is easily accessible to the vast domestic and South Asian market.
• India is a large and rapidly growing consumer market constituting up to 300 million people for branded consumer goods.
• Skilled labour force and professional managers are available at a reasonable cost.
• India has the largest manufacturing sectors in the world, covering almost all areas of manufacturing activities.
• Foreign investment is welcome in India; approval is required but is automatically granted in sixty categories of Industries.
• Rich base in natural resources
• India has a well developed and sophisticated financial sector.
• A sophisticated and modern legal and accounting system.
• English is extensively used for business and is understood almost all over India.
• India is committed to a free economy after having an economy controlled by licensing until 1991.
• India has become a member of the WTO and is disbanding quantitative restrictions on imports.
• Free and full repatriation of capital, technical fee, royalty and dividends is available in the country.

India has signed tax treaties with a number of countries including, Australia, Belgium, Canada, Denmark, France, Germany, Indonesia, Japan, Korea, Mauritius, Singapore, the United Kingdom and the United States. The purpose of these treaties is to avoid double taxation. The following treaties have been successfully used by international investors to reduce their tax obligations in India and in their home countries:

The Indo-U.S. tax treaty considerably reduces the withholding tax in India for royalties, fees for technical services, and for interest paid to the US banks and financial institutions. The withholding tax on dividends arising out of India is 15%, if the parent company owns at least 10% of the voting stock. The withholding tax on royalties and technical services fees is at the rate of 15%. The capital gains are taxed at a rate of 20%. The withholding tax on rental of equipment and interest paid to U.S. banks and financial institutions is at the rate of 10%. All these rates are lower than the regular withholding tax rates.

The withholding tax rates for dividends and capital gains can be reduced further by corporate structuring and tax planning. The Indo-Mauritius tax treaty offers reduced withholding taxes for companies incorporated in Mauritius. Recently some U.S. companies have invested in India through offshore subsidiaries incorporated in Mauritius. For companies incorporated in Mauritius there is no withholding tax on capital gains in India and the withholding tax on dividends is only 5%.

There are two options available to foreign investors who are planning to set up business operations:

Indian company:

A foreign company can start operations in India by incorporating a company under the Companies Act, 1956 through

• Joint Ventures
• Wholly Owned Subsidiaries

Joint Venture with an Indian Partner

Foreign Companies can set up their operations in India by entering into strategic alliances with Indian partners.

Through a joint Venture a foreign investor may benefit from the following:

• Established distribution/ marketing set up of the Indian partner
• Available financial resource of the Indian partners
• Network of contacts of the Indian partners which will help them in the process of setting up of operations

Wholly Owned Subsidiary Company

Foreign companies can also to set up wholly owned subsidiary in sectors where 100% foreign direct investment is permitted under the FDI policy. An application need to be filed with the Registrar of companies for registration and incorporation of the company. Once a company has been duly registered and incorporated as an Indian company, it is subject to Indian laws and regulations as applicable to other domestic Indian companies.

2. Foreign Company

Foreign Companies can set up their operations in India through

• Liaison Office/Representative Office
• Project Office
• Branch Office

Such offices can carry out any permitted activities. Companies have to be registered with Registrar of Companies within 30 days of setting up a place of business in India.

Liaison office

Liaison office acts as a medium of communication between the head office and entities in India. Liaison office cannot engage into any commercial activity directly or indirectly and hence cannot earn any income in India. Its role is to collect information about possible market opportunities and provide information about the company and its products to prospective Indian customers. It can promote export/import from/to India and also facilitate technical/financial collaboration between parent company and companies in India. The approval for such an office in India is granted by the Reserve Bank of India (RBI).

Project Office

A project office can be used by foreign companies planning to execute specific projects in India. Such offices cannot undertake or carry on any activity other than the activity relating to the implementation of the project.

Branch Office

Foreign companies which carry out manufacturing and trading activities abroad are allowed to set up Branch Offices in India for the following:

• Import and export of goods
• Provision of professional or consultancy services
• Carrying out research work
• Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
• Representing the parent company in India and acting as buying/selling agents in India.
• Providing services in Information Technology and development of software in India.
• Providing technical support to the products supplied by the parent/ group companies.
• Foreign Airline/shipping Company.

A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer. Branch Offices established with the approval of RBI may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines Permission for setting up branch offices is granted by the Reserve Bank of India (RBI).

The registration of a company in India

Any company either incorporated or registered in India are governed by The Companies Act of 1956. It sets down rules for the establishment of both "Public" and "Private" companies. Private companies are formed between 2 to 50 members and it prohibits invitation to public for capital issues. Private limited companies are best suited to foreign investors who want to setup their operations in India with their own money or with limited partners in India, and are not planning for a public Issue.

Name of the company : The first step in company formation is to apply for a name. An application in Form No. 1A needs to be filed with the Registrar of Companies (ROC) of the state in which the Registered Office of the proposed Company is to be situated. A fee of INR 500 (around US$ 11) is applicable. After, receipt of application along with the fees, the name is checked for availability, if it is available then it is allotted to you and it remains valid for a period of 6 months. In this time frame, you can complete rest of the formalities of incorporation.

Memorandum and Articles of Association : The MOA states the main and other objects of the proposed company. The AOA covers the rules and procedures for the routine conduct of the proposed company. It also states the authorised share capital of the proposed company and the names of its first directors. A stamp duty of INR 200 (US$ 5) is required to be paid on the MOA while on the AOA it is payable @ 0.15% of the authorised share capital.

Directors : For incorporating a Private Limited Company a minimum of two directors are required and there is no need to appoint a local director

Shareholders: minimum two shareholders. Foreign nationals may hold foreign equity up to 100%. This will depend upon the sector in which the company will operate and is subject to the approval from either the Reserve Bank of India (RBI) or the Foreign Investment Promotion Board (FIPB).

The company Secretary : Companies are required to appoint secretary.

The minimum share capital : Shares should be expressed in fixed amount. Shares like "No par value" or "bearer" are not permitted and the shares to be subscribed should be expressed in Indian rupees. The minimum paid up capital at the time of incorporation of a Private Limited Company has to be INR 100000 (around US$ 2250). There is no upper limit on amount of the capital. It can be increased any time, by payment of additional stamp duty and registration fee.

Registered office : Every company is required to have a registered office in India.

Audit and Financial Returns : Every company must maintain a set of records, which show the financial position at any one time with reasonable accuracy. The accounts comprise a profit and loss account and balance sheet with the auditors' and directors' reports appended. A new company's accounting reference period begins on its incorporation and runs until the following 31st March - unless the company notifies the registrar of companies otherwise. Within ten months of the end of an accounting reference period, an audited set of accounts must be laid before the shareholders at a general meeting and a set delivered to the registrar of companies. Auditors: Every company must appoint a qualified auditor by virtue of the Institute of Chartered Accountants of India Act 1949 and should be completely independent of the concerned company. The audited accounts of the concerned company serve as a tool for various stakeholders like creditors, investors, bankers and revenue authorities.

Taxation : The corporate income tax effective rate for domestic companies is 35% while the profits of branches in India of foreign companies are taxed at 45%. Companies incorporated in India even with 100% foreign ownership, are considered domestic companies under the Indian laws.

Rates

• Revenue accruing to foreign companies (including royalty and technical services fees) from providing services concerning the exploration or production of petroleum or natural gas is subject to a maximum tax on a deemed profit of 10% of gross revenue.
• Foreign companies engaged in the execution of turnkey power project contracts approved by the government and financed by international programs are subject to a maximum tax on a deemed profit of 10% of gross revenue.

Non-Export Incentives

India offers a wide range of concessions to investors to provide incentives for economic and industrial growth and development.

• No corporate taxes are levied for a period of five years for projects set up for domestic power generation and transmission and also for projects in Electric Hardware Technology Park Schemes.Deduction of preliminary and preoperative expenses incurred in setting up a project
• Complete tax exemption on profits from exports of goods
• Full or partial exemption of foreign exchange earnings on construction projects, hotel and tourism related services, royalties, commission, etc.
• Deduction of capital research and development expenditures

Registers : Companies are required to have a register of members and share ledger; a register of directors and secretaries; a register of share transfers; a register of charges; a register of debenture holders.

Annual meetings : An Annual General Meeting (AGM) is mandatory to be held once in every financial year and not more than 6 months after the end of the financial year. For a new company it is not required until 18 months of its incorporation.

Company Seal : All companies must have an engraved seal. This must be impressed on share certificates and must be used whenever the company has to execute a deed.