Statutory and Legal compliances for foreign companies in India are not only to be complied till incorporation but required to be continuously followed over lifetime of foreign companies in India. Legal compliance is the process by which company adheres to complex rules and policies which regulates business practice in particular jurisdiction whereas Statutory compliance is legal framework under which company must function all duties. Foreign companies registered in India has to check applicability of various laws such as companies act, income tax act, competition act, FEMA ,Labour Law, GST, etc. Additionally, the kinds and nature of compliance depends upon type of company and its incorporation, industry type & market size, turnover, etc. Law and Compliance for Indian subsidiary of foreign company in India are simple.
It is easy to form foreign subsidiary company in India but foreign subsidiary company in India has to comply with Indian laws and regulations from the point it gets Certificate of Incorporation by RoC. In India, compliance regime has been made very simple particularly since introduction of company law,2013. All the required compliances can be complied with electronically or by submitting physical forms and documents. Once Foreign subsidiary company in India gets incorporated, every foreign company is required to submit Form FC-1 containing information about charter, place of business of company, list of directors & secretary, etc. along with prescribed fee and documents to Registrar for registration within 30 days of establishment of its Place of Business.
Form FC-1 also be supported with attested copy of approval from RBI under FEMA if any, if no approval is required then declaration stating no approval is required is needed
“Financial year” in relation to any company or body corporate means period ending on 31st march of every year. But in case of foreign company it is important to note that -where a company or body corporate, which is a parent company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Central Government may, on an application made allow any period as its financial year, whether or not that period is a year. Financial year for foreign company In India is April to March.
Foreign companies in India shall prepare financial statements (balance sheet, P&L account) which comply with requirements of schedule III of companies act. Along with the financial statements foreign company need to attach statement of related party transaction, Statement of repatriation of profit, statement of transfer of funds and copy of latest consolidated financial statements as submitted to authority in country of incorporation of parent foreign company. All these documents and forms are to be delivered to registrar within 6 months from close of financial year of foreign company.
Also, maintenance of books of accounts is one of the mandatory compliance for Foreign subsidiary company in India. Books of accounts such as purchase books, sales book, cash book, ledgers, etc. are need to be maintained in physical or electronic form at registered office of foreign subsidiary company in India for period not less than 8 Financial Years immediately preceding financial year.
GST Returns: Foreign subsidiary company in India registered with GST should file Form GSTR1 , GSTR 3B , GSTR-5 etc. through the GST Common Portal. Like other taxpayers registered under GST, the GST return filed by foreign companies must include details of outward supplies and inward supplies. GST filing and payment of GST liability for foreign companies is due on the 20th of each month or within 7 after the last day of the validity of GST registration, whichever is earlier.
TDS Return: Employers and organizations with a valid TAN are qualified for filing TDS returns. Accordingly, Foreign subsidiary company in India has to fulfill the TDS compliances. TDS return is to filed electronically or through facilitation center quarterly but payment of each month to be made monthly.
Professional tax and Provident fund: Foreign companies in India is required to pay these taxes on monthly basis and return of these are filled on yearly basis. Due date for payment of taxes is on or before 15th of following month.
Audit as per companies act: Every foreign company is required to gets its books of accounts pertaining to Indian business operations audited by practicing Chartered Accountant in India. Rules of companies act applicable to Indian companies (chapter X) shall apply mutatis mutandis to foreign company.
Audit as per Income tax act: Every foreign company shall get its accounts pertaining to Indian business operations if total turnover from business exceeds Rs.10 crore or incase of profession income exceed Rs. 50 Lakh by practicing chartered accountant in India or firm of chartered accountant.
Income tax return filing: By plain reading of section 139(1) with companies definition makes it compulsory to file income tax return to foreign companies having income in India or place of business in India. In case where foreign company receive income from bonds or global depository receipts in foreign currency or capital gain as per section 115A and appropriate TDS compliance is made then, such foreign companies are not mandatorily required to file returns.
Annual Return as per companies act: Provisions related to annual returns applicable to foreign companies are same as applicable to Indian companies. Accordingly, every company shall prepare an annual return in from FC-4 and file copy of it with registrar within 60 days from date on which annual general meeting is held.
GST audit: According to provisions of GST applicable to Foreign subsidiary company in India, every registered taxpayer whose aggregate turnover during financial year exceeds Rs.5 crore is required to get his accounts audited by Chartered accountant or Cost accountant.
All the annual compliances and their due dates required to be meet by foreign subsidiary company in India can summarized in tabular form as below-
|1||Income Tax Return||30-09-23||Mandatory to file for all companies in India|
|2||Stat audit||30-09-23||Audit required under Companies act.|
|3||Tax Audit||30-09-23||Audit required under Income tax act.|
|4||Transfer Pricing Audit||30/11/2023||Required if value of international transaction exceed Rs.1 crore|
|5||GST Audit||31/12/2023||Required when turnover of registered taxpayer is above Rs.5crore|
|6||ADT 1||15/10/2023||Form for appointment of first auditor|
|7||FC 4||Within 60days from end of FY||Annual return by foreign company|
|9||PF Return||30/04/2023||Applicable to employers in India having more than 20 employees|
Money received from foreign investors for purchase of shares in company will be accounted for under share application money. The Indian Company is required to issue shares within 180 days from the date of inward remittance to the foreign investor, to avoid violation of the FEMA regulations. Foreign subsidiary in India shall within 30 days from date of issuance of shares file form FC-GPR with RBI along with certificate of company secretary of the company accepting investment from persons who are residing outside India.
In case of foreign companies whose income arises from international transaction, Transfer pricing regulations are need to be taken into consideration including obtaining an audit report and documentation.
ADT 1- When Foreign subsidiary company in India appoints auditor, it is duty of company to inform registrar about appointment of auditor. According to the companies act regulations, company shall communicate to the auditor of its appointment and at the same time, a notice of such appointment has to be filed with the registrar of companies within 15 days of this appointment in from ADT-1.
MGT 14- This E-form is required to be filed by foreign company with RoC within 30days of passing of the resolution or of making any agreement. Alteration in Documents: If any alteration is made to documents delivered to registrar, foreign company shall within 30 days of alteration, file return in form FC-2 with the registrar. Foreign company ceases to have place in India: If any foreign company decide to close its place of business in India, then it is mandatory to give notice of fact to registrar to that effect..
If foreign company contravene the provisions applicable to foreign company, foreign company shall be punishable with minimum fine of Rs.100000 which may extent up to 300000. And in case of continuing offence additional fine which may extent to Rs.50000 for one day shall be levied. But it is worth noting that company’s failure to comply with provisions of this chapter shall not affect the validity of contract entered by foreign company
A N Bhutada & CO is a Chartered Accountant firm in India who can help in Compliance for Indian subsidiary of foreign company. We are team of CA , CS , LLP for your all compliances need. We already assisted clients from USA , Japan , Europe , Australia etc. for company registration in India.