Ramesh S (None) 05 September 2013

Investment of indian company outside india

Hello All,

I am new to this forum and hope to get some help from you experienced people. I want to know that if an indian private limited company (e.g, Company X) wants to set up its subsidiary company outside india (e.g. Company X Pte Ltd. in Singapore) (i.e. Company X will have almost 100% shareholding in the new company that is incorporated in Singapore) what Indian norms does this Company X have to follow in-order to proceed with this set up.

Also, after the subsidiary is set up, company X may need to frequently inject more funds from India to the bank account of the subsidiary. How will this transfer of funds be managed by Company X from an Indian taxation point of view. Similarly funds may also be transferred by the subsidiary to the Indian bank account of the parent company, Can someone share some insights from a income tax point of view?

Any help in this regard would be appreciated. I am very new to all this so please forgive of my question seems silly.

Thanks

Ramesh

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3 Replies

Rama chary Rachakonda (Secunderabad/Telangana state Highcourt practice watsapp no.9989324294 ) 05 September 2013

The total financial commitment of the Indian party, in all the Joint Ventures / Wholly Owned Subsidiaries put together, shall not exceed 400% of the net worth of the Indian party as on the date of the last audited balance sheet. For the purpose of determining the ‘total financial commitment’ within the limit of 400% as specified above, the following shall be reckoned, namely:

a. 100% of the amount of equity shares;

b. 100% of the amount of compulsorily and mandatorily convertible preference shares;

c. 100% of the amount of other preference shares;

d. 100% of the amount of loan;

e. 100% of the amount of guarantee (other than performance guarantee) issued by the Indian party;

f. 100% of the amount of bank guarantee issued by a resident bank on behalf of JV or WOS of the Indian party provided the bank guarantee is backed by a counter guarantee / collateral by the Indian party.

g. 50% of the amount of performance guarantee issued by the Indian party provided that the outflow on account of invocation of performance guarantee results in the breach of the limit of the financial commitment in force, prior permission of the Reserve Bank is to be obtained before executing remittance beyond the limit prescribed for the financial commitment.

Advocate Sastry (Advocate) 05 September 2013

Please visir RBI website and read RBI Master Circular No.11/2013-14 dated 1st July 2013 " Master Circular on Direct Investment by Residents in Joint Venture (JV) /Wholly Owned Subsidiary (WOS) Abroad"..... If you get any doubts ask your Authorised Dealer or you can contact me...

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NRI Legal Consulting (Consultant) 09 September 2013

You can get whole information through RBI website by reading RBI Master Circular No.11/2013-14 dated 1st July 2013 " Master Circular on Direct Investment by Residents in Joint Venture (JV) /Wholly Owned Subsidiary (WOS) Abroad"..... If you get any doubts you can query us query@nrilegalconsulting.com