An Indian business setting up abroad has two sets of obligations. The destination country's law governs the entity itself, and Indian law governs the investment, the reporting and the tax. We deal with the Indian side and work with qualified advisers in the other country.
This describes the subject in general terms and is not advice; what applies depends on the facts, and the law changes.
Understanding the service
Overseas investment by persons resident in India is governed by the Foreign Exchange Management Act, 1999, and by the Overseas Investment Rules, Regulations and Directions of 2022, which replaced the earlier framework from 22 August 2022 and are administered by the Reserve Bank of India through authorised dealer banks.
The framework distinguishes Overseas Direct Investment, which involves equity in an unlisted foreign entity or a stake carrying control, from Overseas Portfolio Investment. Much investment is permitted under the automatic route, with the total financial commitment subject to a ceiling linked to the Indian entity's net worth, and some cases require prior approval.
Reporting runs through the designated authorised dealer bank, in the prescribed form, at the time of the financial commitment, with a unique identification number for the foreign entity and recurring annual reporting thereafter. Reporting can be required even where no money has been remitted, where control exists.
Tax follows. Residence, treaty position, withholding, transfer pricing on dealings with the new entity, foreign tax credit and the disclosure of foreign assets all become live once an overseas entity exists.
We do not incorporate entities abroad, advise on foreign law, or hold offices outside India. Local incorporation and local legal and tax advice are obtained from qualified professionals in that jurisdiction.
When it becomes relevant
- An Indian company setting up a subsidiary or branch abroad
- A resident individual acquiring a stake in a foreign entity
- A group restructuring that moves a holding abroad
- An existing overseas entity whose Indian reporting has fallen behind
- Repatriating profits, or winding down a foreign entity
What the work usually covers, on the Indian side
- Preliminary structuring, including whether the proposal is ODI or OPI and which route applies
- Review against the conditions, including net worth and eligibility
- Reporting through the authorised dealer bank in the prescribed form, and obtaining the identification number
- Recurring reporting, including annual performance reporting, and event-based filings
- Indian tax analysis: treaty position, withholding, foreign tax credit, disclosure of foreign assets
- Transfer pricing on transactions with the foreign entity
- Coordination with lawyers and accountants in the destination country
Framework and sources
The law and professional standards this work is carried out under. Links open the official site.
How the work runs
- Understand the planThe destination, the activity, the ownership and how it will be funded.
- ClassifyEstablish whether the proposal is ODI or OPI, and whether it falls under the automatic route.
- Check conditionsTest eligibility, net worth and the limits that apply.
- Coordinate locallyWork with advisers in the destination country, who handle incorporation and local law.
- ReportFile through the authorised dealer bank and obtain the identification number.
- MaintainKeep up annual and event-based reporting, and the Indian tax position.
A general sequence. Engagements differ, and the scope of each is agreed in writing.
Common questions
Do you incorporate companies in other countries?
No. Incorporation abroad is handled by qualified professionals in that country. We deal with the Indian structuring, reporting and tax, and coordinate with them.
We have not remitted any money. Is reporting still required?
It can be. Where a resident has control of a foreign entity, the position must be examined even without a remittance.
Is prior approval of the Reserve Bank required?
Much overseas investment is permitted under the automatic route subject to conditions. Certain cases require approval. The route is confirmed before the commitment is made.
Do you have offices abroad?
No. We have one office, in Mumbai.