[ESTABLISHING A BUSINESS ENTITY IN INDIA]
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removed this 49% threshold, and now investments by FPIs are permitted up till the sectoral cap limits, provided that there is no transfer of ownership and/or control of the Indian company from an Indian resident to the FPI. This change will essentially allow FPIs to invest in sectors which had a sectoral cap higher than 49%, thus opening up the Indian economy for further FPI inflows. Furthermore, the FPIs can hold up to the sectoral cap in case of a transfer of shares of an Indian company from a non-resident to the FPI, even if such investment leads to the transfer of ownership and/or control of the Indian company. 4.2 Any capitalisation obligations: Presently, there is no requirement for incorporation of companies with any minimum paid up share capital under the Companies Act, 2013. However, from a foreign investment perspective, any foreign investment beyond prescribed percentages is not permitted without prior government approval in Regulated Sectors. Further, depending upon the sector of investment, there could be certain minimum capitalization norms applicable under the prevailing foreign direct investment policy. 4.3 Any special business or investment visa issues: Foreign nationals are allowed to come to India on business or employment visas, depending on the nature of their deployment and other similar factors. For reasons of taxation, deputation of employees of foreign parent companies to their Indian subsidiaries is ordinarily avoided. As per the Ministry of Home Affairs, Government of India latest guidelines, employment visas are only granted to foreign nationals drawing salaries in excess of a
prescribed amount per annum. The salary threshold limit is worked out considering the salary and all other allowances paid to the foreign national in cash and also perquisites like rent free accommodation etc. which are included in the salary for the purpose of calculating income tax. The minimum salary stipulation however does not apply to ethnic cooks, translators and language teachers brought for project related work in India. The employment visa has to be issued from the country of origin or domicile of the foreigner. Foreign nationals may also use the ‘Project’ visa regime for coming to India for execution of specific projects in the power and steel sectors subject to fulfillment of conditions as may be specified. Persons travelling to India on long term employment visas i.e., for a period of more than 180 (one hundred eighty) days will need to register themselves with the jurisdictional Foreigners Regional Registration Office within specified time (ordinarily fourteen days) of arrival in India. 4.4 Any restrictions on remitting funds out of India (withholdings, etc.): Foreign investors can repatriate funds out of India through a number of options including dividends, fees for technical and administrative services, royalties, interest, capital appreciation, etc., after payment of applicable taxes. India also has double taxation avoidance agreements (“ DTAA ”) with all major economies of the world including Australia, China, Germany, France, Spain, Singapore, USA, UK and Japan to name a few. 4.4.1 Repatriation of Profits: Indian companies can remit their profits to a foreign investor by way of dividends subject to dividend distribution tax at 20.00% (twenty percent) plus applicable
ILN Corporate Group – Establishing a Business Entity Series
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