Know Your Compliance for Foreign Subsidiary Company in India
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Basic Facts on Foreign Subsidiary Company Compliance in India
- Foreign subsidiary companies have 50% or more foreign equity ownership. The foreign company is the holding company or parent company.
- Company incorporation determines compliance. Thus, it is necessary to understand what compliances must be met depending on the company type, industry, annual turnover, number of employees, etc.
- Foreign subsidiaries must follow the Income Tax Act, Companies Act, Transfer pricing guidelines, and FEMA guidelines.
- Foreign subsidiaries must file income tax returns with the income tax department, annual returns with the Ministry of corporate affairs, and other filings with the Reserve Bank of India and SEBI.
- Foreign subsidiaries must follow TDS, GST, PF, ESI, and other Indian tax regulations. The industry, state of incorporation, number of employees, and sales turnover of a foreign subsidiary company determine its compliance requirements.
- Most Indian private limited and limited companies can accept 100% foreign direct investment. Due to a growing economy and investor-friendly environment, FDI in India has increased dramatically.
Mandatory Annual Compliances
| Compliance | Description |
|---|---|
| Form FC-1 under Section 380 | This form is to be filed within thirty days of the incorporation. The form should be submitted with the required files and certifications etc that are given by RBI. |
| Form FC-3 under Section 380 | Form FC-3 under Section 380 to the respective Registrar of the Companies depending on where the company is incorporated in India. The form must contain the details of the place of the business as well as the financial records of the company. The form FC-3 has to be filed on or before 31st December of the same Financial year. |
| Form FC-4 under Section 381 | This form concerned with the annual returns of the company has to be filed within 60 days from the end of the preceding financial year. |
| Financial statements | The Foreign subsidiary company has to submit the financial statements of the Indian business and operations. The statement must be submitted within six months of the end of the financial year. |
| The financial statements must include: |
Statements on the transfer of the funds Statements of the earnings repatriated Statements on related party transactions such as a statement on sales. Transfer of property purchases. |
| Accounts audit | The accounts of the foreign subsidiary company must be audited by a practising chartered accountant. It should be properly arranged and made available by the company for the audit. |
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