10 June 2009
An Indian company is manufacturing Ferro Alloys in India. It imports some of the raw material from outside India ( from different countries across the world). It is planning to enter into exports of Ferro Alloys in near future. To facilitate its exports and imports from outside India, it is desirous of opening its offices ( branches/subsidiary companies) outside India. The foreign entities so estblished will also be doing the work independently for other clients and would be generating income therefrom. We are to give -
1. Advice on the structuring options for the export of products overseas by the Company from the following perspectives – Form of organization of the proposed foreign office best suited to the Company ( in terms of tax benefits ( both direct and indirect) and regulatory requirements) Modus operandi of the transactions to be undertaken by the Company with its foreign offices/subsidiaries in terms of billings and payment 2. Advice from the Regulatory perspective on the mode and manner of making investments to establish offices/subsidiaries/warehouses in -
China, Netherlands, and c. Dubai
( There is an additional query with respect to investment in China. In China some tax benefits are allowed tothe companies where a Chinese National is a shareholder and who invests a minimum of 1,00,000 USD in the company. The Indian company is consideraing this option and wants to transfer funds to the Chinese national to make him invest in the Indian company...............how this can be done - can the Indian company lend the money to this Chinese National ? or some other mode is possible?)
3. Income Tax implications in India for the Income earned for the branch/Wholly owned subsidiary outside India in the following countries- a. China b. Netherlands c. South Africa d. Dubai
11 June 2009
Form of organization is a function of purpose of setting up office (i.e. sourcing, export facilitation, logistics, fund raising etc.), income OR expense forecast (where tax implication from foreign country and Indian company arises, investment plans (retention of funds generated), regulatory restrictions.
Query is very generic (reasons for setting up office in China (normally set up to facilitate sourcing / export) will be much different for setting up office in Netherlands - normally set up to reduce tax cost).
CAclubindia
