Increased globalization and liberalization have allowed numerous companies to enter the Indian market. If you are also looking to form a foreign subsidiary company in India, it is indeed a great decision; however, you have to make sure all compliance requirements are fulfilled.
In this post, we will share with you the major company compliances in India for foreign subsidiaries. Before we do that, let’s quickly understand what a foreign subsidiary company is.
What is a foreign subsidiary company?
An enterprise where 50% or more equity shares are owned by a company that’s incorporated in a foreign nation is called a foreign subsidiary company. Every foreign subsidiary company in India is liable to maintain compliance. Since compliances are based on a variety of factors, such as-
- Type of company
- Annual turnover
- State of incorporation
- Employee strength
- Many others
Foreign subsidiary companies have to maintain compliance according to the following guidelines-
- Companies Act
- Income Tax Act
- FEMA guidelines
- Transfer pricing guidelines
- Labour Law
List of Compulsory Compliances for a Foreign Subsidiary Company in India
1. Filling Form FC-1 within 30 days
Filling form FC-1 within 30 days after the establishment and selection of a business place in India is compulsory for the subsidiary of a foreign company. The firm is required to produce the form with the required certifications and other files. This form will be authorized by the RBI or any other regulatory body in India.
2. Submission of Form FC-3 to ROC
A foreign subsidiary company in India must also submit FC-3 to the respective ROC (Registrar of Companies). The form must contain all vital details, such as the place of operations and the financial records of the company.
3. Filing Form AOC 4
According to the Companies Act 2013, all the companies in India must submit Form AOC 4 at the end of every financial year.
4. Submission of MGT-7
MGT-7 is an electronic form offered by the MCA (Ministry of Corporate Affairs), and all registered companies in India are required to file an annual return every year with ROC on the last day of the financial year. This mandatory return includes all the information related to the enterprise, its directors, and shareholders, to name a few.
5. Submission of Form FC- 4
Concerned with the company’s annual returns, form FC-4 must be submitted within 60 days from the end of the preceding financial year.
6. Accounts Audit
All foreign subsidiary companies in India must mandatorily get all of their accounts audited by a practicing chartered accountant. All of the accounts must be in order and made available by the company.
7. Financial Statements
Legal compliances in India also require foreign subsidiary companies to furnish their financial statements related to their operations and business in India. All financial statements must be submitted within 6 months of the end of the financial year. If you have any questions about the financial statements to be submitted, you must connect with one of the best compliance management companies in India. The statements must include the following.
- Balance sheet
- Profit and loss statement
- Audit report and its annexures
8. Submission of validated and translated documents
A foreign subsidiary company in India must ensure that all the documents are in English and submitted to the ROC after validation.
Important Compliances under the Income Tax Act and GST Act
Based on intermittency, there are 3 major company compliances in India.
1. Annual compliances
Once every year, the company has to meet the following compliances.
2. Periodic compliance
As the name suggests, periodic compliances have to be met at regular intervals multiple times a year, but not necessarily on a quarterly or half-yearly basis.
3. Event-based compliances
A foreign subsidiary company in India has to meet event-based compliances in case a certain event or action of the company. According to RBI regulations and FEMA guidelines, the following are the two event-based company compliances in India.
4. FC- GPR
Concerning the remittance received by the company’s shareholders, the FC-GPR form specifies the mode of transfer of the remittance by the company.
FC-TRS concerns the transfer of a foreign subsidiary company’s shares between a non-Indian investor and an Indian resident or vice-versa. FDI (Foreign Direct Investment) policies clearly state that such transactions, which may be in the form of sales or gifts, must be reported within 60 days of the transfer date.
Regardless of whether the Indian resident is the transferor or transferee, the obligation of filing FC-TRS lies on them.
The Bottom Line
Foreign subsidiary companies in India cannot go wrong with legal compliances, and hence they must consult a reliable compliance company in India to keep their company compliant with the norms laid by the RBI and Indian government.
If you need any assistance related to the formation of a wholly owned subsidiary of a foreign company in India or compliances, feel free to connect with FinAccountants.
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