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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 |