Destination India

www.pwc.com
Destination
India
April 2016
Agenda
1
2
3
4
5
Is Destination
INDIA
Entry Strategy
Indian
Regulatory
Environment
Tax Structures
Destination IS
INDIA
Appendix: Self read – relevant web links
Destination India
PwC
April 2016
Slide 2
Section 1
Is Destination INDIA
Destination India
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April 2016
3
Incredible India…..
Destination India
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April 2016
Slide 4
Things you may know about India
Largest
democracy
Infrastructure
developing
Ease of doing
Business @130
2015 – 16
Growth @7.6%
Inflation
@4.83%
Single
Majority Party
after 30 years
Concerns over
retrospective
legislation
Emerging
middle class
Information
Technology
prowess
Destination India
PwC
April 2016
Slide 5
Things you may not know about India
7 Indian companies in Fortune
500
Unity in Diversity
Active member of
G20, SAARC
11th most favored
destination for MNC
headquarters
Over 400 million internet users
and close to 1 bn telecom
subscribers
Destination India
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Very young population
Hyperactive Media
Use of English as
Business
Language
Independent
Judiciary
Key market for leading
MNCs
April 2016
Slide 6
Section 2
Entry Strategy
Destination India
PwC
April 2016
7
Modes of establishing operations in India
Foreign Investment
As Indian Entity
Wholly
owned
subsidiary
Destination India
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Joint
Venture
LLP’s
As Foreign Entity
Branch office
Liaison
office
Project office
April 2016
Slide 8
Entry Strategy via Liaison Office
Singapore
Corporation
(‘HQ’)
Liaison Office
(‘LO’)
Communication Channel
•
Establishing – Approval of Authorised Dealers
Category-I Banks and registration with Registrar
of Companies (RoC)
•
Taxation – No taxable income. Prescribed
procedural annual compliance
•
LO’s under the lens by the Revenue Authorities –
Functionality Test – to evaluate the actual
activities performed on the ground
Pros/ Cons
•
No commercial activity allowed
•
Thin line of difference between creating a taxable
PE because of nature of work involved
•
Primarily used as a model to test the Indian
waters
Represent the Parent/ Group
Destination India
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April 2016
Slide 9
Entry Strategy via Branch Office
Singapore
Corporation
(‘HQ’)
Branch Office
(‘BO’)
•
Establishing – approval of Authorised Dealers
Category-I Banks and registration with RoC
•
Regulatory – only specified commercial
activities; manufacturing not allowed (unless
SEZ);
•
Taxation – taxable as foreign entity for the
profits earned by the Branch
•
Need to undertake tax compliances like tax
audits if applicable, file returns, undergo
assessments, etc.
Pros/ Cons
•
Preferred model for the provision of services
– IT, SWD, etc.
•
Subject to higher rate of taxes, however entire
profits can be repatriated – Dividend
Distribution Tax (DDT) not applicable
Research work in area of its HQ
Professional, Consultancy,
Technical Support and IT Services
Destination India
PwC
April 2016
Slide 10
Entry Strategy via Subsidiary
Singapore
Corporation
(‘HQ’)
Subsidiary
(‘Subsi’)
Maximum flexibility to
conduct business
Moving towards 1-day company
incorporation
Destination India
PwC
•
Establishing – incorporated as a Private or a
Public company in terms of the Indian
Companies Act
•
Regulatory – subject to FDI guidelines, either
under automatic route or approval route.
Governing Authority RoC
•
Taxation –as a normal Indian company with a
lower rate of tax. Also, any distribution of
profits liable for DDT
Incorporation procedure
•
Obtaining DIN (Director Identification
Number), Digital Certificate and apply for
name availability
•
Drafting Memorandum of Association (MOA)
and Articles of Association (AOA)
•
Court stamping and signing of MOA and AOA
by first subscribers
•
Filing with ROC, vetting of MOA and AOA by
ROC
•
Obtaining certificate of incorporation
April 2016
Slide 11
Comparative Analysis
Particulars
Liaison
Office
Project Office
Branch Office
Execution of
specific
projectawarded by
India Company
Only specified
activities
Activities
Non
income
earning
activities
Restrictions
Relaxation in
case of project
Number of
for which
restrictions
approval has
been sought
Wholly Owned
Subsidiary / Joint
Venture Company
Any activities
(Manufacturing is
not possible – unless
SEZ)
Any
activities
where 100%
FDI is
allowed
Number of
restrictions
Only those imposed FIPB
by the (“FIPB”), if
approval –
any
restricted
sector
Around 4-6
weeks
RoC
Approval
Timing
6-8 weeks
6-8 weeks
6-8 weeks
4-8 weeks,
subsequent to FIPB
approval, if
required
Regulatory
Authority
AD/ RBI
AD/ RBI
AD/ RBI
RoC / FIPB
Destination India
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LLPs
April 2016
Slide 12
Section 3
Indian Regulatory Environment
Destination India
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April 2016
13
Governing Authorities
5
4
3
2
1
Regulatory
• Department
of Industrial
Policy and
Promotion
(DIPP)
• FEMA and
FDI policy
Destination India
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MCA
• Company
Incorporation
and governance
• Registrar of
Companies
Reserve
Bank of
India
• Central Banking
Institution,
controls the
monetary policy
• Authorised
Dealers
Listing
Taxation
• Ministry of
Finance
• Securities
Exchange Board
of India
• Central Board of
Direct Taxes
(CBDT)
• Central Board of
Excise and
Customs (CBEC)
• State Taxes
April 2016
Slide 14
Foreign Direct Investment (FDI) policy – Sectoral
Snapshot
100% FDI permitted without approvals (except, a small -ve list)
Prohibited Sectors
Sector
• Agriculture (some exceptions)
• Gambling & Lottery, Nidhi company
• Real Estate (except certain construction development
projects)
• Manufacture of cigarettes, Trading in TDRs
Private Banking
74%
Telecom
100%
Civil Aviation
100%
Insurance
49%
Retail Trading
51% - 100%
Print Media
26-100%
FM Radio
49%
Defence
49%
Railway infra
100%
Conditionalities in certain Sectors
•
Telecom, News Media, FM Radio, TV Channels, Insurance,
Civil Aviation, Trading
Government Sector only
•
Atomic Energy, Railways (operations)
Automatic
Route
Destination India
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Approval Windows
FDI Cap
FIPB/DIPP
Approval
April 2016
Slide 15
Partial Capital A/c Convertibility
Current Account
Negative list principle
• Prohibited list
• Requiring Approval
Capital Account
• Investments
• Loans
• Immovable Property
Destination India
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April 2016
Slide 16
Regulatory – RBI – Exchange Control – ADs
Framework
1
Reserve Bank of India (RBI)
Authorised Dealers (ADs)
- Banks
3
Moving towards e-filing
Destination India
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2
Description
Form
30 days - receipt of share application money
ARF
30 days - issue of shares + Certificate from
Chartered Secretary
FC-GPR
60 days from receipt - transfer of shares resident
and non-resident
FC-TRS
Inward remittances
FIRC
Reporting – ECB Transactions
ECB - 2
Reporting – ECB loan agreement
Form -83
Software Export Declaration
SOFTEX
April 2016
Slide 17
Section 4
Tax Structures
Destination India
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April 2016
18
Tax Structures – Overview – Direct taxes
Fundamentals
Description
Rate *(%)
A - Domestic company
Central subject
Uniform tax year
(April to March)
No Group taxation
system
Dividend
Distribution Tax
Capital Gains Tax
Income less than INR 10 mill
30.9
Income more than INR 10 mill but less
INR 100 mill
33.063
Income more than INR 100 mill
34.608
Minimum Alternate Tax (MAT) - base
rate - 18.5% (profits levels above)
19.055/ 20.38/21.34
Dividend Distribution tax (DDT)
20.358
Buy Back tax (BBT)
23.072
B - Foreign company
Branch, project/other PE – base rate 40% (income level as above)
41.2/ 42.024/43.26
* Including surcharge and cesses
Destination India
PwC
April 2016
Slide 19
Tax Structure – Overview – Indirect taxes
Central Levies
State Levies
VAT/ purchase tax – on
intra-state transactions
Customs Duty:Basic customs duties on
import of goods (‘BCD’)
Additional duties of
customs – in lieu of Excise
(‘ACD’) and in lieu of VAT
(‘SAD’)
Excise duty – on
manufacture of goods
Service tax – on provision
of services
Entry tax on entry of
goods into the state
Indirect
taxes
in India
Electricity duty
Octroi – on entry into
municipal areas
Stamp duty
Central sales tax – on
inter-state sales
Other cesses and
surcharges
Destination India
PwC
Entertainment tax/
Luxury tax
Other cesses and
surcharges levied
April 2016
Slide 20
Tax Incentives & Deductions
SEZ Units – 100% tax holiday for 5 years and 50% for next
10 years
Food Processing Units – 100% tax holiday - first 5 years and a
deduction of 30%/ 25% of profits for subsequent 5 years
Infrastructure Development (Power, Ports, Airports,
Highway, Water Projects) – Profit based tax incentive
Start-up India - 3-years tax holiday for eligible start-ups
(3 out of 5) – set up April 2016 to March 2019
Expenditure in Scientific Research – Weighted deduction –
100% to 200%
Proposal to insert sunset-clause in incentives/ deductions
– In line with announcement to reduce corporate tax rate
Destination India
PwC
April 2016
Slide 21
Compliance Calendar – Tax
Monthly
Date
E-payment of excise or service tax liability
06th - subsequent month
Payment of taxes withheld
07th / 30 April for month of March
Filing of monthly Excise return
10th – subsequent month
Quarterly
Advance Tax
15% - 15 June
45% - 15 September
75% - 15 December
100% - 15 March
Withholding tax returns
15th July/ 15th Oct/ 15th Jan/15th
May
Yearly
Income Tax Return for Individuals and Corporates (No Tax
Audit & Non- TP)
July 31
Income Tax Return for Corporates and Non-Corporates
(Subject to Tax Audit & Non- TP)
September 30
File income tax return and other certificates – Subject to TP
November 30
Destination India
PwC
April 2016
Slide 22
Section 5
Destination IS INDIA
Destination India
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April 2016
23
Destination IS INDIA…..
Business
Friendly
Government
Human Capital –
Resource Pool and
Consuming Class
Destination India
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You have arrived….
Global
Headwinds vs
India’s
Growth Story
& Robust
macro
economic
indicators
April 2016
Slide 24
Thank You
Look forward to support you
in your India growth story !!
Abhishek Shukla
Deputy Head – India Desk
PricewaterhouseCoopers Singapore Pte. Ltd.
email: abhishek.shukla@sg.pwc.com
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Appendix: Self read – relevant web links
Description
Web link
PwC India
http://www.pwc.in/
Department of Industrial Policy and
Promotion
http://dipp.nic.in/English/default.aspx
Reserve Bank of India
https://www.rbi.org.in/home.aspx
MEA – Investment and Technology
Promotion Division
http://indiainbusiness.nic.in/newdesign/index.php
MCA – Incorporation of Company and
Governance
http://www.mca.gov.in/
CBDT – Income Tax
http://www.incometaxindia.gov.in/Pages/default.aspx
Overseas Indian Facilitation Centre
http://www.oifc.in/business-connect/doing-businessindia
Listing – Securities and Exchange Board
http://www.sebi.gov.in/index.html
of India
Make in India – Manufacturing
http://www.makeinindia.com/home
Start-up India
http://www.startup-india.org/
Destination India
PwC
April 2016
Slide 26