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4. Funding of local operations
Local expenses to be met out of inward remittances received from abroad from the head office through normal banking channels
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Local expenses to met through inward remittances from head office or from earnings from permitted operations |
Funding to be through equity or other forms of permitted capital infusion or borrowings( local as well as overseas as per prescribed norms) or internal accruals. |
Contribution in the capital of the LLP should be through inward remittance or by debit to NRE / FCNR account of the designated partner. LLP ' s are not eligible to raise ECB |
5. Limitation of liability |
Parent company liable for acts of LO |
Parent company liable for acts of BO / PO |
Liability limited to the extent of equity participation in the Indian company |
Liability of the partners is limited to their agreed contribution to the LLP except in case of fraud, wrongful act, etc |
6. Compliance requirements under companies act |
Registration and periodical filing of accounts / other documents |
Registration and periodical filing of accounts / other documents |
Significantly high statutory compliance and filing requirements |
Registration with ROC required. Filing annual accounts and submitting annual statement on solvency |
7. Compliance requirements under foreign exchange management regulations |
Required to file an annual activity certificate( from auditors in India with RBI). In case of multiple LO ' s the nodal office could file a combined annual activity certificate with respect to all its offices in India |
Required to file an annual activity certificate( from auditors in India with RBI) In case of multiple BO ' s the nodal office could file a combined annual activity certificate in respect of its offices in India |
Required to file periodic and annual filings relating to foreign liabilities and assets, receipt of capital and issue of shares to foreign investors |
No filing requirements prescribed as of now |
8. Compliance requirements under the Income tax act |
Since LO is not permitted to undertake any business activity in India, it is typically not subject to tax in India. However, LO is required to undertake annual compliance by filing annual information in the prescribed form |
Liable to be taxed on income earned at the rate applicable to foreign corporations. 40 % plus surcharge and education cess. In case above tax is not applicable than MAT is considered to be applicable to BO / PO at rate of 18.5 % plus surcharge and education cess of its book profits. No further tax on repatriation of profits, which are permissible in both cases. Indian transfer pricing regulations are applicable |
Liable to be taxed on global income at 30 % plus surcharge and education cess on a net income basis. In case above tax is not applicable than Subsidiary company liable to MAT of its book profits. Dividend declared freely remittable but subject to distribution tax of 15 % plus surcharge and education cess on dividends, pursuant to which dividend is tax free for all shareholders. Distribution tax to be paid only on amount of dividend. |
Liable to be taxed on global income at 30 % plus education cess on net income basis. In case above tax is not applicable then LLP liable to MAT at the rate of 18.5 % plus cess of its book profits no DDT leived on profit distribution and Indian transfer pricing regulations are applicable |