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Type of Entity As Foreign Entity As Domestic Entity
Point of Comparison Branch Office Liaison Office Project Office Wholly Owned Subsidiary Limited Liability Partnership
A. Incorporation/Establishment point of view
Establishment Approval from Reserve Bank of India (RBI) is required Approval from Reserve Bank of India (RBI) is required Automatic Route- An intimation of the establishment is required to be sent to RBI Approval of Registrar of Companies (ROC) is required. Approval of ROC would be required
Pre Establishment Statutory Fee No Government Fee is required to be paid No Government Fee is required to be paid No Government Fee is required to be paid Stamp Duty and ROC fee is required to be paid depending on the Authorised Share Capital of the company Stamp Duty and ROC fee is required to be paid depending on the Contribution of LLP
Minimum Capital Investment Not Applicable Not Applicable Not Applicable 0.10 Million Indian Rupees for a Private Limited Company 0.50 Million Indian Rupees for a Public Limited Company No minimum contribution has been prescribed
Lead time for setting up 3-4 Months 3-4 Months 1-2 Months 2-3 Months 2-3 Months
Operations Business operations as approved by RBI No Business operations are permitted. LO can only act as a communication channel Permitted business operations Very Wide & Significantly higher flexibility on nature of operations Very Wide & Significantly higher flexibility on nature of operations
B. Compliance & Taxes
Legal Compliance Moderate Moderate Moderate Higher Higher
Permanent Account number (PAN No.) i.e. Registration Under Income Tax Act. Applicable Applicable Applicable Applicable Applicable
Tax Deduction Number (TAN No.) i.e. Registration under Income Tax Act for deduction of Tax Applicable Applicable Applicable Applicable Applicable
Permanent Establishment (PE) BO being a commercial office will constitute PE for Taxation purpose LO being a representative office is not taken as PE PO being a commercial office will constitute PE for Taxation purpose Not Applicable Not Applicable
Status of Taxable Entity All tax returns and other submissions concerning BO operations will be filed in the name of Parent Company as a foreign taxable entity All tax returns and other submissions concerning LO operations will be filed in the name of Parent Company as a foreign taxable entity All tax returns and other submissions concerning PO operations will be filed in the name of Parent Company as a foreign taxable entity WOS is a separate legal entity LLP is a separate legal entity
Rate of Corporate Tax – Base Rate of 40% – Surcharge @ 2% in case income exceeds Rs. 10 Million and less than Rs. 100 Million i.e. 42.024% – Surcharge @ 5% in case income exceeds Rs. 100 Million i.e. 43.26% – Cess at 3% Not Applicable – Base Rate of 40% – Surcharge @ 2% in case income exceeds Rs. 10 Million and less than Rs. 100 Million i.e. 42.024% – Surcharge @ 5% in case income exceeds Rs. 100 Million i.e. 43.26% – Cess at 3%) – Base Rate of 25% in case total Turnover is less than Rs. 500 Million otherwise 30% – Surcharge @ 7% in case income exceeds Rs. 10 Million and less than Rs. 100 Million i.e. 27.55% or 33.063% – Surcharge @ 12% in case income exceeds Rs. 100 Million i.e. 28.84% or 34.608% – Cess at 3% – Base Rate of 30% – Surcharge @ 12% in case income exceeds Rs. 10 Million i.e. 34.608% – Cess at 3%
Dividend Distribution Tax Not Applicable Not Applicable Not Applicable 20.357647% of total amount distributed (Base Rate of 17.647%, Surcharge @ 12% and Cess at 3%) Not Applicable
Transfer Pricing Applicable Not Applicable Applicable Applicable Applicable
Import export Code (In case of Import Export of Goods) Applicable Not Applicable Applicable Applicable Applicable
Goods and Services Tax Applicable Not Applicable (As sale of services and Goods is not allowed) Shall be applicable in case LO receive any service where GST is payable under reverse Charge Applicable Applicable Applicable
Exit Approval of RBI is required for closure of business operations Approval of RBI is required for closure of business operations Automatic subject to fulfilment of certain conditions. Detail winding up procedure is required to be undertaken for the closure of a WOS. Winding procedure as prescribed under LLP Act, 2008 is required to be followed.
Disclaimer: Information in this note is intended to provide only a general update of the subjects covered. It is not intended to be a substitute for detailed research or the exercise of professional judgment. The rates of Taxes mentioned above are as applicable for the Financial Year 2017-18. KNM accepts no responsibility for loss arising from any action taken or not taken by anyone using this publication. Please take proper professional help specific to your business operation before initiating any further step in this regards.

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