Insights

There are slight differences between the three offices. A Liaison Office may only engage in promotional activities and establish business contacts. A Project Office is particularly intended to organise temporary cooperation, for example for infrastructure projects. When setting up a Project Office, the starting point is the dissolution after the end of the project. A Branch Office is allowed to do business and invoice Indian customers. The tax rate for a BO is very high at 43.26% compared to a local Pvt. Ltd. structure, though. These three forms are considered extensions of a foreign company in India and the parent company is therefore legally liable for the activities of all branch office structures.

A Pvt. Ltd. is a limited liability company. It is ideal for separating ownership, management and financing. The Pvt. Ltd. is by far the most frequently chosen legal form for foreign entrepreneurs and investors in India. Setting up an Indian Pvt. Ltd. is time-consuming as the procedure is complicated and involves a lot of documentation. Our experts can help you with every step of registering a Pvt. Ltd. in India.

Simply put, a Special Economic Zone (SEZ) is an industrial zone with a favorable tax environment. If you settle in an SEZ, you pay no income tax for the first five years and only 50% of your income thereafter. Also, companies in SEZs are exempt from paying sales tax (GST)and do not have to pay Basic Custom Duty (30% on average in India). It can be very beneficial for you to set up in an SEZ, but it depends entirely on your product, your goals and where your customer base is located. Before you decide to establish yourself in an SEZ, it is therefore important to do thorough market research. Our local experts can always support you with this. Read more about our market research and analysis here.

This is a common complaint from foreign companies doing business in India. It is true (usually) that when sending an invoice for services rendered to an Indian party, the Indian party is required to withhold and remit 10 or 20% withholding tax. Indian service suppliers can offset this again, but it is more difficult for foreign suppliers. You should make proper arrangements in advance with your Indian buyer and his/her accountant to avoid paying TDS.

PAN is short for Permanent Account Number. A PAN card was a necessity until recently and was obtained after obtaining aPAN registration with the Indian Revenue Service. The need to apply for PAN expired as of July 2016. Until the first half of 2016, foreign companies that sent invoices to Indian customers for services had to apply for PAN registration in India. Although it is no longer mandatory to have a PAN card, in some cases it may still be smart to apply for one. For example, if you want to establish yourself in India long term, you need to register with the Indian tax authorities after which you will automatically get a PAN and PAN card.

The Goods and Services Tax (GST) is India's version of VAT. There are five rates, ranging from 0% to 28%, under which 1211 categories of goods and services are divided. Under the GST system, tax is levied at any time value is added to the product and a sale is made. This runs up to the final sale to the customer. You can read how the Goods and Services Tax is levied and whether you have to pay it here.