Finance Ministry to ease transfer pricing rules

Move to simplify tax regime, reduce litigation and help improve business environment

The finance ministry is streamlining safe harbour rules and advance agreements, two mechanisms to determine the price of services rendered by a multinational to its subsidiary in India.

Safe harbour rules — directives on margins the tax authorities should accept for the transfer price declared by an assessee — have drawn a tepid response since they were introduced a couple of years ago. There is also a huge backlog in advance pricing agreements (APAs), an ahead- of- time understanding between a taxpayer and the tax authority on an appropriate transfer pricing methodology.

The move would simplify the tax regime, reduce litigation and help improve the business environment, a finance ministry official said.

The steps will involve lowering the margins in safe harbour rules and definitions will be reworked to remove ambiguities. India announced the safe harbour rules in 2013, but the high margins of up to 25 per cent on total operational profits have made it unattractive for companies to use them.

“We are addressing issues related to transfer pricing to align it with best practices. We are revising the safe harbour rules that will include revisiting the definition and revising the margins, considered high by companies,” said a tax official.

Information technology (IT) and information technology- enabled services (ITeS) companies with transactions of up to Rs.500 crore have a safe harbour operating margin of 20 per cent and those with transactions above Rs.500 crore have a margin of 22 per cent. Knowledge process outsourcing companies have a safe harbour operating margin of 25 per cent.

Experts argue there is ambiguity in the definition of IT, ITeS and knowledge process outsourcing companies with a lot of overlap. Moreover, the margins decided in tribunals or in advance pricing agreements turn out much lower, ranging between 15 and 18 per cent.

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Source:Business Standard, New Delhi, 4th Nov. 2015

setting up Subsidiary in India - Different Modes of Setting up Business in India

If anybody want want to register foreign company in India three modes of setting up in India/ Doing business in India are available, these are-

Liaison Office – This kind of office is setup wherein only liaison / Marketing work is undertaken by the entity in India and all transactions whether related to Sale/ Purchase/ Provision of any services and even receipts and payment of money is undertaken directly by the parent company. Liaison office is not authorized to undertake any type of commercial activity accept liaison.

Foreign Branch Office – This kind of office setup is one step ahead of Liaison Office. In this type of setup trading transactions i.e. sale / purchase of goods and provision of services is allowed directly by the Foreign Branch Office itself but there are restrictions with regard to manufacturing and providing training.

Wholly Owned Subsidiary – This type of setup is allowed to undertake all kinds of commercial transaction.

After deciding on the mode for settingup business in India as mentioned above necessary permission of either the Reserve Bank of India (RBI) or Foreign Investment Promotion Board (FIPB) is required. In most of the activities 100% foreign equity participation is allowed on automatic route, in such cases there is no requirement for permission. For others permission is required from either FIPB or RBI before registration.

After obtaining permission of Reserve Bank of India (RBI) or Foreign Investment Promotion Board (FIPB) Company / branch office / liaison office is required to be registered with the Registrar of Companies under the Companies Act also. This finishes the process of incorporation of an organisation in India.

Foreign Branch Office as well as Wholly Owned Subsidiary are allowed to work subject to general or specific restrictions imposed by the Reserve Bank of India (RBI) or Foreign Inward Promotion Board (FIPB). They are required to file necessary returns with various taxation and legal authorities as a separate entity from its parent.

Liaison Office Vs Branch Office Vs Wholly Owned Subsidiary – Pros and Cons

1. Setting Up

A wholly owned subsidiary is easier to setup than a liaison / branch office and does not require RBI approval. Whereas, A Liaison / Branch Office requires prior approval of RBI and it takes around 1-6 months for formation.

2. Cost Involved

Setting up a wholly owned subsidiary costs less than setting up a branch / liaison office in India.

3. Tax Liability

Income Tax liability of Branch Office is higher than that of a wholly owned subsidiary. A Liaison Office is not chargeable to tax. The rates of income tax for branch office are

Income Tax          40% of total income
Surcharge             2.5% of income tax if total income tax exceeds INR1,00,00,000/-

Education Cess@3% of Income tax and surcharge (if any).

Income Tax Rates for Wholly Owned Subsidiary are:

Income Tax        30% of total income
Surcharge          10% of income tax if total income tax exceeds INR1,00,00,000/-

Education Cess@3% of Income tax and surcharge (if any).

Further, in case of wholly owned subsidiary Dividend Distribution Tax @15% is applicable in case of remittance/repatriation of profits as dividend.

4. Closure

Liaison / Branch office is easier to close as compared to wholly owned subsidiary. A wholly owned company has to undertake liquidation proceedings as described under the Companies Act or has to be closed under the Fast Track Closure Scheme.

Legal Compliances in India

Liaison Office, Branch office and WOS (wholly owned subsidiary) are required to comply with various other legal compliance for working in India. A brief details of the same are given below

Income Tax Compliance
– Annual Income Tax returns
– Advance Tax calculation and deposit (Not Applicable to Liaison Office)
– Quarterly Tax Deducted at Source Compliance (Not Applicable to Liaison Office)

Sales Tax Compliance (In case of sale of goods) (Not Applicable to Liaison Office)
– Periodical returns
– statutory forms
– compliance with various provisions

Service Tax Compliance (in case of provision of taxable service) (Not Applicable to Liaison Office)
– Periodical returns
– compliance with various provisions
– periodical calculation and deposit of taxes

For more info visit us at  Internal audit firm in Delhi

How to register for VAT in India

In this blog, we will tell you about VAT (Value Added Tax)and how to register for it.

What is VAT?

Introduced to replace the Sales Tax, VAT is a multi-point levy on each of the entities in the supply chain with the provision to allow ‘Input tax credit (ITC)’ on tax at an earlier stage, which can be appropriated against the VAT liability on subsequent sale.

Who is liable to register for VAT?

Any trading or manufacturing business, whether a sole proprietorship or a partnership firm or a private limited company, that sells its products is liable to be registered for VAT.

What is the procedure of VAT registration?

1. Submit an application for VAT in Form 1 along with the following documents to the local VAT office:

• Central Sales Tax registration certificate(Form A)

• Professional tax registration certificate(Form 2)

• Copy of important documents such as the address proof, ID proof of the Proprietor/Partner/Director

• Four PP size photographs of the Proprietor/Partner/Director

• PAN No. & Bank Account No of the Proprietor/Partner/Director

• Copy of the rental agreement of the business place

• Details of business activities

• Partnership deed (in case of a partnership firm)

• Memorandum of Association and Articles of Association (in case of a Private Limited company)

2. The authorities from the local VAT office will inspect the premises of where you conduct business within a prescribed time

3. Once the inspection is over, you will have to pay a specified fee to the local office for your VAT registration

4. On payment of the fee, a TIN number will be allotted to you for your business and you will also be given the VAT registration Certificate.

For more information on Startup / Company registration in India and approval of company name and trademark registration send query to us visit this link Company Incorporation in India.

How to Incorporate company in India is easy Now

Making India easy for business

The country needs to fix its dismal track record when it comes to issues around cross-border trading, dealing with construction permits, and enforcing of contracts, to improve its overall rank

Addressing global dignitaries at the recently concluded Seventh Vibrant Gujarat Global Investors Summit in Gandhinagar, Prime Minister Narendra Modi said he wants to make India the easiest place to do business. "Ease of doing business in India is a prime concern for you and us. I assure you that we are working very seriously on it," he said. "We want to make them not only easier than earlier, not only easier than the rest, but, we want to make them the easiest."

But that's easier said than done. The 2015 World Bank group's Doing Business index ranked India at 142, down from 140, which it was the year before. Analysing the ten different parameters - starting a business, dealing with construction permits, getting electricity, registering a property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency - the World Bank group gives individual rankings for each one of these, which collectively provides the final rank. Experts say if India is to improve its overall rank in Doing Business index, it is important to fix issues when it comes to trading across borders, dealing with construction permits, and enforcing contracts. India is dismally ranked 126, 184 and 186 in trading across borders, dealing with construction permits, and enforcing contracts, respectively.

Trading across borders

Easier export-import regulations have remained a major challenge for successsive governments. Getting regulatory clearances in ports and airports - which one needs in order to get the final custom clearance - is one of them. Experts say one key reason for cargo clogging many ports and airports is the multiplicity of regulators, and that not all of them sit at the terminal. Points out a Bengaluru-based custom agent: "There was no drug controller in Bengaluru for a long time. So if anybody wanted to bring in medicines, they have to either use the Chennai or the Mumbai terminals." In Delhi, it takes almost a week to 10 days if you want to get a food regulator's approval, said another custom agent.

Said a trade expert familiar with the issues: "A person should not be going to the regulator's office in the city. The regulator should be at the terminal itself. Courier companies do not have the Electronic Data Interchange (EDI) system yet - for easier custom clearance - even as the discussions have been going on for the last seven to nine years. Further, courier companies are not allowed commercial exports - only gifts and samples are allowed. Even though the country's foreign trade policy allows the use of courier companies for commercial exports, custom rules bar it.

Also, the number of documents required to carry out trading across borders in India are more. According to World Bank group Doing Business report, it takes seven documents to export, and ten to import, to and from India. The comparative number of documents required in Singapore is three. It takes 16 days in India, and six days in Singapore, to export. "It takes time to get documents approved by officials," explains an Indian exporter.

Dealing with construction permits

According to the Doing Business report, it takes around 25 permits to start a greenfield construction project in India. The time taken to get these permits is estimated at around 200 days.

"Dealing with multiple agencies and departments to get various clearances in the construction sector has been a cause of concern for developers," said Neeraj Sharma, Partner, Walker Chandiok & Co LLP. "This significantly derails their project planning and execution, and ultimately impacts the deliveries to the customers," he added. Many feel that the time is right for the government to create an online single window clearance mechanism which can decrease the time taken to get these clearances.

Another common industry complain is that urban planning bodies are filled with semi-skilled people who do not understand the complexity of the permit process. "India needs to significantly invest in capacity building and training in this respect. This can be done by setting up more educational institutions catering to the requirements of real estate and construction sectors," said Sachin Sandhir, Global Managing Director - Emerging Business and MD - South Asia, RICS. As per the Doing Business in India report it can take up to two months just to take a building construction permit in Delhi. In Mumbai, it can take up to 45 days to get permanent water and sewer connections. Sandhir said there was a need to modernise and streamline standards, bylaws, statutes and practices as the process remains complex, opaque, and lacks accountability.

Enforcing contracts

India is at the bottom of the chart at 186th place when it comes to enforcing of contracts. As per the Doing Business report, it takes almost four years to enforce a contract in India.

Settlement of claims is a protracted exercise burdened by several formal procedural requirements, say those in legal fraternity. "Even if private parties agree upon arbitration, which is an extra-judicial remedy, courts often intervene when approached by either party. This makes arbitration an even longer route for dispute settlement," said Aakanksha Joshi, Associate Partner at Economic Laws Practice. "Often, these tribunals have technical members who make decisions that are not in accordance with the law. Such decisions are bound be challenged on legal grounds, making dispute resolution even longer," she added.

Absence of speedy disposal of cases - complicated with less number of judges - is another issue which pinches the litigant the hardest. Experts advise that settlement through arbitration should be encouraged in a time-bound manner.

For more information on Startup / Company registration in India and approval of company name and trademark registration send query to us visit this link Company Incorporation in India.

 

Company Formation is Easy Now - Just One Step Away

How to Start a Startup / Small business

Starting a Business

This guide is dedicated for those beginners who want to become entrepreneurs. Before you learn the steps for becoming an entrepreneur, you first need to understand who is an entrepreneur. The person who identifies a need, takes risks, is creative, innovative and ultimately produces solutions to address the chosen need is called an entrepreneur. All of us want to become entrepreneurs but few are able to achieve this feat. So what are the steps required to become an entrepreneur or how to start a startup? Everything is explained as follows:

How to Start a Startup / Business Idea

1.         Finding an idea: Every business starts from idea. A good idea is one that will make a difference and can actually be done. Listening and learning provide the basis to generate good business ideas. Keenly observing the situations which matter to you and to the people in those situations will help you to come up with great business ideas.

2.         Evaluating your idea: Once you come up with an idea, it is time to screen it. Screening means to check its chances of success or failure. Analyse the idea for strengths, weaknesses, opportunities and threats(SWOT). When you are done with SWOT, consider the market environment, resources required and the possibility of future success.

3.         Capturing business idea: In this step, you will have to address what are your customers buying?, who is going to buy your product?, how many potential customers are in your target market? who are your competitors? In the next 3, 6, 12 months, what are the milestones to accomplish? what will your business look like after 1, 2 years? what is the cost to make your product or deliver service? How much will you charge to earn a reasonable profit?

4.         Writing a Business Plan: A business plan is an essential tool for all entrepreneurs. It provides a blueprint and manual on translating your idea into a profitable product or service. It also serves as a powerful diagnostic tool in case things go wrong. Your business plan should attract investors in order to secure finance for your startup.

5.         Finding a Team: Once you complete your business plan, develop a team with right skills and competencies in order to implement your idea. Clarify your vision and proposed product or service to them. Discuss roles and responsibilities to each employee in the team. Offer them contracts in which you need to include employment period, salary, working hours, leave etc.

6.         Registering your Business: Choose a name for your company or firm and choose a form of organisational structure such as sole proprietorship, partnership, LLP, private limited company, co-operative etc. Now create a corporate identity such as logo, business cards, letter head, baseline etc. You will also have to consider legal aspects such as tax, copyrights, trademarks, patents etc.

7.         Choosing a Location: The place where it will be located and operated on is called as business location. It should be suitable for your business type, accessible to customers, meets your layout requirements, connected to transport network, availability of basic amenities, parking space, meets government regulations etc.

8.         Accessing to Finance: Estimate the total amount of capital required for renting, salaries, machinery, tools, building, utilities etc. Once you have determined the budget, identify source of finance. Whether to secure funds from banks or angel investors or to utilize your own personal savings. Read how to finance your business to understand which method of obtaining funds is better for a startup business.

For more information on Startup / Company registration in India and approval of company name and trademark registration send query to us visit this link Company Incorporation in India.

Company Incorporation in india

How to Register a Company / Business / Firm Name in India

Registering a startup or a new business in India first and foremost one has to go by, there are some official procedures a startup or a company has to follow in order to register them in Indian official records, MCA (ministry of Corporate Affairs) has to made registration process online few years back, please find below on how to go about these process when you want to register your company.

One don’t need to visit corporate office, you can apply for registration just sitting at home. We will help you to get a legal license for your business. The registration includes some must follow rules and some registration like Digital Signature Certificate(DSC), Director Identity Number(DIN) and filing for an eform.

These are four major steps:

•           Acquiring Digital Signature Certificate(DSC)

•           Acquiring Director Identification Number(DIN)

•           Filing an eForm or New user registration

•           Incorporate the company

It’s necessary to get registered yourself to run your business without any legal problem. India is a land of opportunity, no matter in which field your business is operating the chances of getting success is very high, so it just needs a start. starting an entrepreneurship in India would fetch you great success. fallow this post sincerely till you incorporate your final claim for your company. We assure one will end up in getting their business registered after following this procedure.

Know the basics first: What is mean by company, the private company and public company?

In India, there are about 7 lacks registered companies and every month thousands of firms apply for registration. company is a legal entity; According to Section 3 of companies act company means a legal entity formed and registered under Companies Act 1956. Under the ministry of corporate affairs, every company is to be registered by the registrar of companies for the state. This act maintains two types of companies called private and public companies. The ‘Limited’ is the most commonly used corporate form at the end of the company name. First you need to know what these public and private companies are and decide how you want your company to get registered.

When it comes to company registration in India, Every firm will have following two options:

1.         Private company:

2.         Public company:

Let’s start the registration procedure: 4 Steps

Step 1: Acquire Director Identification Number(DIN)

This is the first process in registration that each director of the company should obtain their identification number. As per the amendment act 2006, acquiring a DIN  is compulsory for every director i.e. as such every existing and intending directors have to obtain their DIN. To get DIN one need to file a eForm DIN-1. The DIN-1 form is available on Official site of the ministry of corporate affairs the link is DIN-1 Form.

•           Register yourself on MCA Website first and have a login id. After filling DIN-1 Form, one should upload the filled form by clicking to eForm upload button on MCA website and should pay applicable fees.

•           After getting generated DIN one should intimate their company about DIN. The director can intimate their company about DIN  by using DIN-2 Form.

•           Then company should intimate the Registrar of Corporates(ROC) about all director’s DIN through DIN-3 Form.

•           If there is any change in DIN or need for any updation  like change of address, personal details etc, then director should intimate this change by submitting the eForm DIN-4 Form.

 

Step 2: Acquire Digital Signature Certificate(DSC):

In order to ensure the security or authenticity of documents filed electronically the information act 2000 demands a valid digital signature on the documents submitted electronically. This is the only and safest way that one can submit their documents electronically. The digital signature certificate should be acquired by only those agencies which are appointed by the controller of certification agencies (CCA). One should not use DSC given by any other agency which is not approved and it’s illegal to use others DSC as yours or the false one.

If you already have a digital signature then you can use the same, no need to apply for another. But do check for your digital signature validity, agencies issue DSC’s with one or two year validity after expiry you have to renew it.

One can acquire his/her Digital Signature certificates  from these government listed agencies like TCS, IDBRT, MTNL, SAFESCRYPT, NIC, nCODE Solutions etc. to check out their price details of these Govt approved agencies, Go to this link.

Step 3: Create a account on MCA Portal – New user registration

This is about having a registered user account on MCA Portal for filing a eForm, for online fee payment, for different transactions as registered and business user. Creating an account is totally free of cost. To register yourself on the MCA portal, click on the register link.

Step 4: Apply for the company to be registered.

This is the final major step in a registration of your company which includes incorporating company name, Registering the office address or notice of situation of office and notice for appointment of company directors, manager and secretary. And also regarding the take and pay for their qualification shares.

After submitting these forms, once the application has been approved by MCA, you will receive a confirmation email regarding the application for incorporation of a new company, and the status of the form will get changed to Approved.

Check these documents before submission of a company:

1.         DIN of all those directors of a proposed company.

2.         DSC – Digital Signature Certificate

3.        Original copy the of formal letter issued by ROC regarding availability of Company name.

4.         Form-1 for incorporation of a company.

5.         Form-18 for situation or address of the proposed company.

6.         Form-32 for particulars of proposed directors, managers and secretary.

Formalities to be followed while company Incorporation in India:

1.         Obtain a TAN card

2.         Obtain a Permanent account number (PAN) from income tax dept. India

3.         If required: Documents obeying shop and establishment acts.

4.       If required: For foreign trade, Registration documents of import export code from Director General of foreign trade.

5.         If required: Registration documents of Software technologies Parks of India (STPI).

6.         If required: RBI approval for foreign companies investing in India and FIPB approval.

7.        Both Indian and foreign directors need to have valid Digital Signature Certificates from authorized agencies.

       

Procedure of Opening / Setup Subsidiary Company in India

In recent past Government of India has opened its doors for international companies to open their subsidiary company in India or branch in India. This move was highly welcomed by international business community and hence many international brand have started their subsidiary companies or branches in India. 

Companies / Business having operations in countries other than India can set up wholly-owned subsidiary in India under those sectors where in 100% foreign direct investment is permitted under the Foreign Direct Investment Policy issued by Government of India. 

A foreign company or business can start their wholly-owned subsidiary in India may be either of the following business / company types like : Private Limited Company, Public Limited Company, Unlimited Company and under Sole Proprietorship. International business groups / companies can also set up their operations in India through the business entities: Liaison Office/Representative Office, Project Office, Branch Office. These companies have to register their subsidiary companies with Registrar of Companies which can undertake any permitted business activities.

It is vital to choose the right kind of business consultant who have expertise in starting a subsidiary company in india which best suits its purposes and takes care of liability issues and tax planning issues. We Signs and Marks having years of professional experience in providing assistace to Foreign Direct Investors can help you to starting or setting up your subsidiary company in India.

Foreign direct investors who are planning in setting up a subsidiary company or office in India are required to seek approvals from Government of India before investing in India. Our expert team can help in getting those approvals and perform those much need liasions and paper work in limited period of time.

Holding company Vs.  Subsidiary company

With regard to Foreign Direct Investment in India we can provide professional assistance in How to form Subsidiary in India, Opening Branch in India, How to Incorporate in India, Forming Company in India, Incorporating in India, Forming Subsidiary in India, Starting Business in India, Types of Companies in India, Business Entities in India, Procedure for Formation of Company India, Forming Corporation in India, Forming Private Limited Company in India.