What is a foreign subsidiary company?
A subsidiary company is a company in which more than 51% of the equity shares are owned by a foreign company incorporated outside India; such a company is known as a holding company.
The rules and regulations are framed by:
- Companies Act, 2013
- Income Tax Act, 1961
- FEMA, 1999
- GST, 2017
- SEBI Rules
- RBI Compliances
- Compliances under Companies Act 2013
- Form FC-1 u/s 380
It is to be submitted within 30 days of incorporation, not alone but with other documents, certificates, etc., for other bodies such as the RBI.
Form FC-3 U/S 380
It is to be filed with the Registrar of companies (ROC) depending upon the location of incorporation.
Form FC-4 U/S 381
It is the form of the annual return and is to be filed within 60 days from the end of the immediately preceding financial year.
Event based compliances as per SEBI rules and RBI compliances
This is for the transfer of foreign company shares between a resident and a non resident investor, or vice-a-verse. It can be as a gift or otherwise. It is done on the direction of FDI Policies. The same is to be done within 60 days from the date of transfer.
It is concerned with the mode of transfer of remittance with the shareholders of the foreign subsidiary company.
Compliances as per income tax and GST rules
Periodic compliancesWhat is a foreign subsidiary company
These are the compliances that should occur regularly throughout the year, unlike annual compliance, which can be done on a monthly or quarterly basis as the case may be.
These are the compliances to be met once every year; the company has an obligation to meet these compliances, i.e. it is mandatory for the company.
For example: the company has to do the following every year, GST filings, TDS filings under the Income tax Act, compliances under RBI ompliances under SEBI’s rules and regulations, annual financial statements.
Audit of accounts
All the foreign subsidiary company accounts must be audited by a practising chartered accountant and should be available for audit as and when required.
Importance of meeting compliances
A foreign subsidiary company must meet all compliances as there can be extreme consequences if they failed to do so. For example, the failure to meet need compliances may result in the company being fined, being imposed penalties and can also lead to criminal charges with imprisonment under pertinent provisions of applicable laws.
We assist our clients in dealing with adherence related to company incorporation, business setup, ROC filings, winding up of the company, etc. If you have any questions or would like to know more about compliances/ regulations applicable to a subsidiary of a foreign company, kindly contact us.