DestinationIndia
April 2016
www.pwc.com
PwC
Agenda
Destination IndiaSlide 2
April 2016
1
Is DestinationINDIA
2
Entry Strategy
3
IndianRegulatory
Environment
4
Tax Structures
5
Destination ISINDIA
Appendix: Self read – relevant web links
PwCDestination India
3April 2016
Is Destination INDIA
Section 1
PwC
Incredible India…..
Destination IndiaSlide 4
April 2016
PwC
Things you may know about India
April 2016
Largestdemocracy
2015 – 16Growth @7.6%
Emergingmiddle class
InformationTechnology
prowess
SingleMajority Partyafter 30 years
Infrastructuredeveloping
Ease of doingBusiness @130
Concerns overretrospective
legislation
Destination IndiaSlide 5
PwC
Over 400 million internet usersand close to 1 bn telecomsubscribers
11th most favoreddestination for MNCheadquarters
Active member ofG20, SAARC
Unity in Diversity
7 Indian companies in Fortune500
Key market for leadingMNCs
IndependentJudiciary
Use of English asBusiness
Language
Hyperactive Media
Very young population
Things you may not know about India
April 2016Destination IndiaSlide 6
PwCDestination India
7April 2016
Entry Strategy
Section 2
PwC
Modes of establishing operations in India
As Indian Entity
Whollyowned
subsidiary
Joint
Venture
As Foreign Entity
Branch officeLiaisonoffice
Project officeLLP’s
Foreign Investment
April 2016Destination IndiaSlide 8
PwC
Communication Channel
Represent the Parent/ Group
Entry Strategy via Liaison Office
Liaison Office(‘LO’)
SingaporeCorporation
(‘HQ’)
• Establishing – Approval of Authorised DealersCategory-I Banks and registration with Registrarof Companies (RoC)
• Taxation – No taxable income. Prescribedprocedural annual compliance
• LO’s under the lens by the Revenue Authorities –Functionality Test – to evaluate the actualactivities performed on the ground
Pros/ Cons
• No commercial activity allowed
• Thin line of difference between creating a taxablePE because of nature of work involved
• Primarily used as a model to test the Indianwaters
April 2016Destination IndiaSlide 9
PwC
Entry Strategy via Branch Office
Branch Office(‘BO’)
SingaporeCorporation
(‘HQ’)
• Establishing – approval of Authorised DealersCategory-I Banks and registration with RoC
• Regulatory – only specified commercialactivities; manufacturing not allowed (unlessSEZ);
• Taxation – taxable as foreign entity for theprofits earned by the Branch
• Need to undertake tax compliances like taxaudits if applicable, file returns, undergoassessments, etc.
Pros/ Cons
• Preferred model for the provision of services– IT, SWD, etc.
• Subject to higher rate of taxes, however entireprofits can be repatriated – DividendDistribution Tax (DDT) not applicable
Research work in area of its HQ
Professional, Consultancy,Technical Support and IT Services
April 2016Destination IndiaSlide 10
PwC
Entry Strategy via Subsidiary
Subsidiary(‘Subsi’)
SingaporeCorporation
(‘HQ’)
• Establishing – incorporated as a Private or aPublic company in terms of the IndianCompanies Act
• Regulatory – subject to FDI guidelines, eitherunder automatic route or approval route.Governing Authority RoC
• Taxation –as a normal Indian company with alower rate of tax. Also, any distribution ofprofits liable for DDT
Incorporation procedure
• Obtaining DIN (Director IdentificationNumber), Digital Certificate and apply forname availability
• Drafting Memorandum of Association (MOA)and Articles of Association (AOA)
• Court stamping and signing of MOA and AOAby first subscribers
• Filing with ROC, vetting of MOA and AOA byROC
• Obtaining certificate of incorporation
Maximum flexibility toconduct business
Moving towards 1-day companyincorporation
April 2016Destination IndiaSlide 11
PwC
Comparative Analysis
ParticularsLiaisonOffice
Project Office Branch OfficeWholly OwnedSubsidiary / JointVenture Company
LLPs
Activities
Nonincomeearningactivities
Execution ofspecificproject-awarded byIndia Company
Only specifiedactivities
(Manufacturing isnot possible – unlessSEZ)
Any activitiesAnyactivitieswhere 100%FDI isallowed
RestrictionsNumber ofrestrictions
Relaxation incase of projectfor whichapproval hasbeen sought
Number ofrestrictions
Only those imposedby the (“FIPB”), ifany
FIPBapproval –restrictedsector
ApprovalTiming
6-8 weeks 6-8 weeks 6-8 weeks
4-8 weeks,subsequent to FIPBapproval, ifrequired
Around 4-6weeks
RegulatoryAuthority
AD/ RBI AD/ RBI AD/ RBI RoC / FIPB RoC
April 2016Destination IndiaSlide 12
PwCDestination India
13April 2016
Indian Regulatory Environment
Section 3
PwC
Governing Authorities
April 2016
1 Regulatory
• Departmentof IndustrialPolicy andPromotion(DIPP)
• FEMA andFDI policy
2 MCA
• CompanyIncorporationand governance
• Registrar ofCompanies
3 ReserveBank ofIndia
• Central BankingInstitution,controls themonetary policy
• AuthorisedDealers
• Ministry ofFinance
• Central Board ofDirect Taxes(CBDT)
• Central Board ofExcise andCustoms (CBEC)
• State Taxes
4 Taxation
5 Listing
• SecuritiesExchange Boardof India
Destination IndiaSlide 14
PwC
Sector FDI Cap
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%
Foreign Direct Investment (FDI) policy – SectoralSnapshot
Prohibited Sectors
Conditionalities in certain Sectors• Telecom, News Media, FM Radio, TV Channels, Insurance,
Civil Aviation, Trading
• Agriculture (some exceptions)• Gambling & Lottery, Nidhi company• Real Estate (except certain construction development
projects)• Manufacture of cigarettes, Trading in TDRs
Government Sector only• Atomic Energy, Railways (operations)
Approval WindowsFIPB/DIPPApproval
AutomaticRoute
100% FDI permitted without approvals (except, a small -ve list)100% FDI permitted without approvals (except, a small -ve list)
April 2016Destination IndiaSlide 15
PwC
Partial Capital A/c Convertibility
Negative list principle
• Prohibited list
• Requiring Approval
Current Account
• Investments
• Loans
• Immovable Property
Capital Account
April 2016Destination IndiaSlide 16
PwC
Regulatory – RBI – Exchange Control – ADs
Description Form
30 days - receipt of share application money ARF
30 days - issue of shares + Certificate fromChartered Secretary
FC-GPR
60 days from receipt - transfer of shares residentand non-resident
FC-TRS
Inward remittances FIRC
Reporting – ECB Transactions ECB - 2
Reporting – ECB loan agreement Form -83
Software Export Declaration SOFTEX
Reserve Bank of India (RBI)1
Authorised Dealers (ADs)- Banks
2
Moving towards e-filing3
FrameworkFramework
April 2016Destination IndiaSlide 17
PwCDestination India
18April 2016
Tax Structures
Section 4
PwC
FundamentalsFundamentals
Tax Structures – Overview – Direct taxes
* Including surcharge and cesses
Description Rate *(%)
A - Domestic company
Income less than INR 10 mill 30.9
Income more than INR 10 mill but lessINR 100 mill
33.063
Income more than INR 100 mill 34.608
Minimum Alternate Tax (MAT) - baserate - 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
Central subject
Uniform tax year(April to March)
No Group taxationsystem
DividendDistribution Tax
Capital Gains Tax
April 2016Destination IndiaSlide 19
PwC
Tax Structure – Overview – Indirect taxes
Central Levies State Levies
Customs Duty:-Basic customs duties onimport of goods (‘BCD’)Additional duties ofcustoms – in lieu of Excise(‘ACD’) and in lieu of VAT(‘SAD’)
Excise duty – onmanufacture of goods
Service tax – on provisionof services
Central sales tax – oninter-state sales
Other cesses andsurcharges
VAT/ purchase tax – onintra-state transactions
Entry tax on entry ofgoods into the state
Electricity duty
Octroi – on entry intomunicipal areas
Stamp duty
Entertainment tax/Luxury tax
Other cesses andsurcharges levied
Indirecttaxes
in India
April 2016Destination IndiaSlide 20
PwC
SEZ Units – 100% tax holiday for 5 years and 50% for next10 years
Infrastructure Development (Power, Ports, Airports,Highway, Water Projects) – Profit based tax incentive
Food Processing Units – 100% tax holiday - first 5 years and adeduction of 30%/ 25% of profits for subsequent 5 years
Start-up India - 3-years tax holiday for eligible start-ups(3 out of 5) – set up April 2016 to March 2019
Tax Incentives & Deductions
Slide 21
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
April 2016Destination India
PwC
Compliance Calendar – Tax
Slide 22
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 June45% - 15 September75% - 15 December100% - 15 March
Withholding tax returns15th July/ 15th Oct/ 15th Jan/15th
May
Yearly
Income Tax Return for Individuals and Corporates (No TaxAudit & 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
April 2016Destination India
PwCDestination India
23April 2016
Destination IS INDIA
Section 5
PwC
Destination IS INDIA…..
Human Capital –Resource Pool andConsuming Class
GlobalHeadwinds vsIndia’sGrowth Story& Robustmacroeconomicindicators
BusinessFriendlyGovernment
You have arrived….
April 2016Destination IndiaSlide 24
Thank You
About PwCAt PwC, our purpose is to build trust in society and solve important problems. We’re a networkof firms in 157 countries with more than 208,000 people who are committed to deliveringquality in assurance, advisory and tax services. Find out more and tell us what matters to youby visiting us at www.pwc.com.In India, PwC has offices in these cities: Ahmedabad, Bangalore, Chennai, Delhi NCR,Hyderabad, Kolkata, Mumbai and Pune. For more information about PwC India's serviceofferings, visit www.pwc.com/inPwC refers to the PwC International network and/or one or more of its member firms, each ofwhich is a separate, independent and distinct legal entity in separate lines of service. Pleasesee www.pwc.com/structure for further details.
©2016 PwC. All rights reserved
Look forward to support youin your India growth story !!
Abhishek ShuklaDeputy Head – India DeskPricewaterhouseCoopers Singapore Pte. Ltd.email: [email protected]
PwC
Appendix: Self read – relevant web links
Description Web link
PwC India http://www.pwc.in/
Department of Industrial Policy andPromotion
http://dipp.nic.in/English/default.aspx
Reserve Bank of India https://www.rbi.org.in/home.aspx
MEA – Investment and TechnologyPromotion Division
http://indiainbusiness.nic.in/newdesign/index.php
MCA – Incorporation of Company andGovernance
http://www.mca.gov.in/
CBDT – Income Tax http://www.incometaxindia.gov.in/Pages/default.aspx
Overseas Indian Facilitation Centrehttp://www.oifc.in/business-connect/doing-business-india
Listing – Securities and Exchange Boardof India
http://www.sebi.gov.in/index.html
Make in India – Manufacturing http://www.makeinindia.com/home
Start-up India http://www.startup-india.org/
April 2016Destination IndiaSlide 26