Foreign Subsidiary Company Compliance

Like every of those corporations located in India and owned as well as managed by Indian individuals and firms, the India-based foreign subsidiary companies and firms also mandatorily need to maintain strict and perfect compliances with all concerned Indian regulatory as well as Governmental bodies and authorities.

Foreign subsidiary companies are compulsorily required in order to maintain compliance in accordance with the Income Tax Act, Companies Act, transfer pricing guidelines as well as FEMA guidelines. According to the income tax act, companies act, transfer pricing guidelines & FEMA guidelines, every foreign subsidiary company is required to maintain compliance like a proprietorship, partnership firm, LLP or a corporation. Foreign subsidiary company compliance essentially includes filing of income tax return to the income tax department, filing of annual returns to the ministry of corporate affairs (MCA) and other filings to authorities like reserve bank of India (RBI) or Securities exchange board of India (SEBI). Like other corporations, foreign subsidiary company also required to comply with TDS regulations, GST regulations, ESI regulations etc. The compliance obligation for a foreign subsidiary company shall vary depending on the industry, state of incorporation, number of staffs and sales turnover.

The mandatory compliances for foreign subsidiary company in India are -

•    Filing Form FC-1 – Form FC-1 is required to be filed by the subsidiary of a foreign company in 30 days after establishment as well as selection of business place in India. The form must be certified or authorized through RBI or other regulatory bodies in India.

•    Financial Statements – According to provision and regulations stated in the Indian companies’ act 2013, every foreign subsidiary corporation active in India should make financial statements of its Indian business operations. These financial statements must be filed with Registrar Of Companies (ROC) in 6 months from the end of the fiscal year of the foreign company. These financial statements should include information relating to –

o    Statement of repatriation of earnings and profits.

o    Statement linked with related party transactions.

o    Statement of money transfer involving concerned Indian subsidiary as well as any other companies or related parties of the holding foreign corporation.

•    Foreign subsidiary accounts –All the foreign subsidiary company must examine and verify their books of accounts by a practising Chartered accountant of India.

•    Filing Form FC-3 – Form FC-3 must be filed by foreign subsidiary corporation with Registrar Of Companies (ROC) in order to furnish details relating to the place of business and the financial records of the corporation.

•    Annual return – All the foreign subsidiary companies are required to compulsorily file annual returns in form FC-4 in 60 days from the end of its fiscal year. Also, all the documents distributed by subsidiary in India also required to be submitted towards the ROC.

•    Validation/Authentication of the translated documents – Every corporation related documents by subsidiary to ROC should be in English and all translated documents should be validated by a lawyer practising in India.

•    Income Tax and Annual Return - Income tax filing and annual return filing should be completed before 30th September of each financial year.

•    GST Filing –As per the GST regime proposed to be rolled out in 2017, it is required for Foreign Subsidiary Company in India to register under Goods and Services Act. 

The additional Compliances are:

•    Compliances with ESI Return and PF Regulation.

•    Other Various Compliances under the concerned ROC.

•    Other Compliances in accordance with all rules and regulations related to the Companies Act of 2013.

•    Compliances under Secretarial Standards I & II.

•    Compliances relating to RBI, FEMA, Transfer Pricing, FDI Authorities, and so forth.

•    Compliances under each and every rules and regulation related broadly with SEBI.

•    Compliances under other concerned legal Acts and Statutes, for instance, Corporate and Commercial Laws, Maritime and Admiralty Laws, Intellectual Property Laws, Labor and Employment Law, Excise and Customs, Environmental Law, and so on.

•    And, additional compliances demanded or deemed needed.

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Author:

eStartIndia Team