What does Inbound Investment Structuring mean?
Choice of Entity
|Compliances of Income Tax||
|Foreign Direct Investment/Foreign Exchange Management Regulation||
Use of Holding Companies
Direct Investments in India
Foreign Investor > Indian Company Key Issues
- Capital gains on the selling of securities are taxable in India
- Treaty advantage for capital gains is only accessible in specific countries
- Risk of double taxation owing to contradictory origin laws
Mauritius is almost like a Center for foreign firms trading in India. The formation of a parent company in Mauritius is inevitable, particularly for portfolio investors who benefit from portfolio investments in India in the course of capital gains. Many nations do not impose a capital gain tax on non-residents who trade in their country's stocks. However, where a foreign company owns shares in Indian Company it will be required to pay tax at the rate of 20% on long-term capital gain and tax at the rate of 30% on the short-term capital gain. Therefore, in the event of short-term gains, the foreign investor will not receive full payment for taxes paid in India. For contrast, in the case of Foreign Institutional Investors and venture capital firms, the majority of investors are pension schemes which are sometimes tax-exempt companies in their home countries. Consequently, they don't have enough taxable income to account for the tax paid in India. This is why many inbound funds have traveled from Mauritius to India. As a result, a huge amount of foreign direct investment has gone into the IT and IT markets/industries.
Many companies benefit from tax holiday under section 10A/10B which are set up for IT services and Business Process Outsourcings. It is very normal for entrepreneurs to commence a company with minimal paid-up money, to push businesses to a fair maturity and to allow private equity investors to invest in these firms. To compliance with laws such as Sec. 10A (9), such companies also lose tax exemptions once new investors enter. This is counterproductive to the main objective of delivering a tax incentive to those units set up to STPs for the growth of the software industry and promoting their extension. Provisions such as this also require foreign investors to recruit holding companies in such a manner that they are sensitive to adjustments to foreign law or internal reform.
The regulatory environment in regard to foreign investment has been gradually relaxed in order to make the market comfortable. The government's liberalization policies were targeted at fast and significant development of the country's economy and harmonious alignment with the global economy.
Key Services provided by us for Inbound Investment Structuring?
- Consult Indian Entrance Policy and Suggestions for Better Ownership / Investment Jurisdiction in India.
- Recommending on the transformation of a company by selecting the best entry method, such as the creation of a division, affiliate, LLP or joint partnership.
- Offer capital restructuring facilities in terms of foreign exchange strategies to hold resettlement in check.
- Assistance in applying, receiving the requisite permissions, including regulatory requirements from the Reserve Bank of India, the Foreign Investment Promotion Board, the Government of India or any other regulatory authority.
- Aiding and trying to finalize from an investor viewpoint, joint venture contracts, any other business arrangements or deals from a tax perspective.
- We keep a target in order to follow the Due Diligence