{"id":683,"date":"2020-05-09T10:23:35","date_gmt":"2020-05-09T10:23:35","guid":{"rendered":"http:\/\/ventureasy.com\/blog\/?p=683"},"modified":"2020-12-23T05:36:09","modified_gmt":"2020-12-23T05:36:09","slug":"difference-between-branch-and-subsidiary-in-india","status":"publish","type":"post","link":"https:\/\/ventureasy.com\/blog\/difference-between-branch-and-subsidiary-in-india\/","title":{"rendered":"Difference Between Branch and Subsidiary in India"},"content":{"rendered":"\n

There are many entry modes by which a foreign company can establish an entity in India. The choice of business form entirely depends upon the end goals to be achieved. <\/p>\n\n\n\n

In this article we will discuss the following 2 options for foreign companies entering into India:<\/p>\n\n\n\n

  1. Establishing a Branch office (BO);<\/li>
  2. Establishing a Subsidiary or Wholly Owned Subsidiary (WOS)<\/li><\/ol>\n\n\n\n\n\n\n\n

    Meaning<\/strong><\/h4>\n\n\n\n

    Branch Office (BO)<\/strong><\/p>\n\n\n\n

    Branches are a part of the parent organization, which are opened to perform the same business operations as performed by the parent company, to increase their reach.

    Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to setup Branch Offices with specific approval of the RBI. Normally, the Branch Office should be engaged in the activity of the Parent Company.<\/p>\n\n\n\n

    Subsidiary or Wholly Owned Subsidiary (WOS)<\/strong><\/p>\n\n\n\n

    A subsidiary company is a company, whose controlling stake is held by another entity, i.e. the holding company. In India, a Subsidiary is an incorporated entity formed and registered under the Companies Act, 2013. It is a distinct legal entity, apart from its shareholders and Parent Company.<\/p>\n\n\n\n

    Permitted Activities<\/h4>\n\n\n\n

    Branch Office (BO) <\/strong><\/p>\n\n\n\n

    1. Export\/import of goods.<\/li>
    2. Rendering professional or consultancy services.<\/li>
    3. Carrying out research work, in areas in which the parent company is engaged.<\/li>
    4. Promoting technical or financial collaborations between Indian companies and parent or overseas group company.<\/li>
    5. Representing the parent company in India and acting as buying\/ selling agent in India.<\/li>
    6. Rendering services in Information Technology and development of software in India.<\/li>
    7. Rendering technical support to the products supplied by parent\/group companies.<\/li>
    8. Foreign airline\/shipping company. <\/li><\/ol>\n\n\n\n

      Subsidiary or Wholly Owned Subsidiary (WOS)<\/strong><\/p>\n\n\n\n

      As per its \u2019main objects\u2019 stipulated in the Memorandum of Association subject to Indian regulations. It can also be same as that of the Parent Company. <\/p>\n\n\n\n

      Analysis of difference between Branch & Subsidiary<\/h4>\n\n\n\n\n\n\n\n\n\n\n\n\n\n
      Basis<\/strong><\/td>\nBranch Office<\/strong><\/td>\nSubsidiary<\/strong><\/td>\n<\/tr>\n
      Liabilities<\/td>\nThe liability of the Branch is unlimited. The assets of the parent company are can be utilized to fulfill the liabilities of the Branch office.<\/td>\nThe liability of the Parent company is limited to the extent of its shareholding in the subsidiary. The assets of the foreign company are not subject to any attachments.<\/td>\n<\/tr>\n
      Permitted Incomes<\/td>\nThe entire expenses of the BO in India will be met either out of the funds received from Head Office through normal banking channels or through income generated by it in India.<\/td>\nAll income arising out of its business activities.<\/td>\n<\/tr>\n
      Taxation<\/td>\nSince a branch office of a foreign company is taxed as a foreign company in India, it is taxed @ 41.6%.<\/td>\nThe subsidiary is an Indian Company and will be taxed at 31.2% , as applicable for Companies registered in India.<\/td>\n<\/tr>\n
      Dividend Payment<\/td>\nDividend paid to Parent company is tax free.<\/td>\nDividend can be paid after payment of Dividend Distribution Tax.<\/td>\n<\/tr>\n
      Management<\/td>\nBO is managed by Authorized Representative, resident in India (Country Manager)<\/td>\nMinimum two directors (at least one director shall be an Indian National)<\/td>\n<\/tr>\n
      Criteria for set up<\/td>\nParent Company should have a profit making track record during the immediately preceding five financial years in the home country.Net Worth of the Parent Company not less than USD 100,000 or its equivalent.<\/td>\nA private company can be incorporated with a basic Capital of Rs.1 Lakh and minimum two subscribers. No requirement of track record of parent company as shareholder.<\/td>\n<\/tr>\n
      Typical Terms of approval<\/td>\n1.\tNot to expand its activities or undertake any new trading, commercial or\nindustrial activity other than that is expressly approved by the RBI.\n2.\tThe entire expenses in India will be met either out of the funds received from\nhead office through normal banking channels or through income generated\nby it in India.\n3.\tThe Branch Office will not accept any deposits in India\n4.\tThe commission earned by the Branch Office from parties abroad for any\nagency business will be repatriated to India through normal banking channels\n5.\tNot to undertake any retail trading activity\n6. A Branch Office is not allowed to carry out manufacturing or processing activities in India, directly or indirectly.\n<\/td>\nA private company can be incorporated with minimum two subscribers. Broadly, it:\ni)\trestricts the right to transfer its shares\nii)\tlimits the number of its members (shareholders) to fifty;\niii)\tprohibits any invitation to the public to subscribe for any of its shares or debentures; and;\niv)\tProhibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives.\nThe conditions will be different for Public Limited Companies.\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n","protected":false},"excerpt":{"rendered":"

      There are many entry modes by which a foreign company can establish an entity in India. The choice of business form entirely depends upon the end goals to be achieved. In this article we will discuss the following 2 options for foreign companies entering into India: Establishing a Branch office (BO); Establishing a Subsidiary or … <\/p>\n

      Continue reading “Difference Between Branch and Subsidiary in India”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"class_list":["post-683","post","type-post","status-publish","format-standard","hentry","category-private-limited-company"],"yoast_head":"\r\nDifference Between Branch and Subsidiary in India - VenturEasy<\/title>\r\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\r\n<link rel=\"canonical\" href=\"https:\/\/ventureasy.com\/blog\/difference-between-branch-and-subsidiary-in-india\/\" \/>\r\n<meta property=\"og:locale\" content=\"en_US\" \/>\r\n<meta property=\"og:type\" content=\"article\" \/>\r\n<meta property=\"og:title\" content=\"Difference Between Branch and Subsidiary in India - VenturEasy\" \/>\r\n<meta property=\"og:description\" content=\"There are many entry modes by which a foreign company can establish an entity in India. 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