Slide 2 Presentation by: Prashant Ajmera (Advocate) B.Sc. LL.B.
(India) ICSA (UK) Indian Law Office of Prashant Ajmera &
Associates (Ajmera Corporate Services Pvt. Ltd.) Date: 18 th
October, 2013 Venue: Ahmedabad Management Association (AMA)
Presentation by: Prashant Ajmera (Advocate) B.Sc. LL.B. (India)
ICSA (UK) Indian Law Office of Prashant Ajmera & Associates
(Ajmera Corporate Services Pvt. Ltd.) Date: 18 th October, 2013
Venue: Ahmedabad Management Association (AMA) Slide 3 Prashant
Ajmera, B.Sc. LL.B. (India) ICSA (UK) Indian Lawyer NRI / OCI card
holder Canadian citizen since 1999 Lived out side India since 1988
Started international law practice in 1993 Associated with law
firms in many countries Now full time practice of assisting SMEs
& HNIs to establish business internationally www.ajmeralaw.com
www.AjmeraLaw.comAjmera Corporate Services Pvt. Ltd. Slide 4 Indian
Rules International Rules International Tax planning Indian Rules
International Rules International Tax planning Slide 5 Investing
Abroad & Establishing Business Internationally Earlier, India
Inc. was all about INVESTING IN INDIA. 1992-2005 Invest in India
However in recent times there has been a shift in government
policy: 2005 and thereafter Invest abroad as well
(http://business.gov.in) www.AjmeraLaw.comAjmera Corporate Services
Pvt. Ltd. Slide 6 Investments Abroad by Indian Co. Outward FDI from
India for the period April 1, 2007 to May 31, 2011 (Figures in USD
million) PeriodFinancial Commitment April -
MarchEquityLoanGuarantee Issued Total
2007-200811269.182718.026959.9620947.16
2008-200910732.263329.003104.8817166.14
2009-20106763.273620.197603.7917987.25
2010-20119351.777346.8927230.5243929.18 April to May 2011
731.413193.241166.235090.88 As reported by Authorized Dealers in
Form ODI www.AjmeraLaw.comAjmera Corporate Services Pvt. Ltd. Slide
7 Investments Abroad by Indian Co. Outward FDI from India for the
period April 1, 2007 to May 31, 2011 (Figures in USD million)
PeriodFinancial Commitment April - MarchEquityLoanGuarantee Issued
Total 2011-2012 5556.9425131.931115,083.1525,772.03 2012-2013
5638.77354149.094315,197.0924,984.96 2013-Aug-13
2,790.442161.700311,410.7016,362.83 As reported by Authorized
Dealers in Form ODI www.AjmeraLaw.comAjmera Corporate Services Pvt.
Ltd. Slide 8 Investing Abroad & Indian Rules Fast Track Routes
and Automatic Routes for a company: upto 100% of its net worth The
total 'financial commitment' of the Indian Party in JVs/WOSs in any
country other than Nepal, Bhutan and Pakistan should be upto 100%
of its net worth and the investment should be in a lawful activity
permitted by the host country. Again increase to 400% if External
Commercial Borrowing is taken from abroad. The Indian Party should
not be on the Reserve Bank's exporters caution list. The Indian
Party should route all transactions through one of the authorized
dealers. If investment is more than 5 million US$, valuation must
be made by a SEBI approved merchant bank. www.AjmeraLaw.comAjmera
Corporate Services Pvt. Ltd. Slide 9 Establishing your business
internationally & Indian rules The application shall be made
in: shares FORM ODI if the investment is for acquiring shares of a
foreign company engaged in the same core activity in exchange for
American Depository Receipts (ADRs)/Global Depository Receipts
(GDRs). Certified copy of the Board resolution, Statutory Auditors
Certificate and Valuation report. Authorized dealer must file Part
1- III of ODI form online. If the investment is by share swap,
valuation must be made by a SEBI approved category 1 merchant
banker or appropriately recognized valuer in the foreign country.
Investment in Pakistan is not allowed. Nepal investment only in
Indian rupees, Bhutan- in Indian rupees and in freely convertible
currency. No registration with RBI necessary but after first
investment, an Unique Identification Number (UIN) is issued.
www.AjmeraLaw.comAjmera Corporate Services Pvt. Ltd. Slide 10
Establishing your business internationally & Indian rules
Investments not covered under the automatic route must be made only
after obtaining permission from RBI. Some examples: Energy and
natural resources - if investment is more than 400% of the total
net worth. Investments in overseas unincorporated entities in the
oil sector by resident corporations exceeding 400% of their net
worth. Overseas investments by proprietorship concerns and
unregistered partnership firms satisfying certain eligibility
criteria. Investments by registered trusts/societies (satisfying
certain eligibility criteria) engaged in the
manufacturing/educational/health care sector in a JV/WOS outside
India. Investment has to be in the same sector of activity.
www.AjmeraLaw.comAjmera Corporate Services Pvt. Ltd. Slide 11
Establishing your business internationally & Indian rules
Funding for Overseas Direct Investment (ODI)can be obtained by one
or more of the following sources: 1. Withdrawal of foreign exchange
from an Authorized Dealer (AD) bank in India. 2. Swapping of shares
(refers to the acquisition of the shares of an overseas entity by
way of exchange of the shares of the Indian entity). 3.
Capitalization of exports and other dues and entitlements. 4.
Proceeds of External Commercial Borrowings/Foreign Currency
Convertible Bonds. 5. In exchange of ADRs/GDRs issued in accordance
with the scheme for issuance of Foreign Currency Convertible Bonds
and Ordinary Shares Scheme, 1993 (through Depository Receipt
Mechanism) and the guidelines issued by the Government of India in
this matter. 6. Balances held in Exchange Earners Foreign Currency
account of the Indian Party maintained with an Authorized Dealer.
7. Proceeds of foreign currency funds raised through ADR/GDR
issues. With respect to (6) and (7) above, the ceiling of 400% of
the net worth does not apply. www.AjmeraLaw.comAjmera Corporate
Services Pvt. Ltd. Slide 12 Establishing your business
internationally & Indian rules Partnership firm: Partnership
firms registered under the Indian Partnership Act, 1932 can make
overseas direct investments subject to the same terms and
conditions as applicable to corporate entities. Individual partners
can hold shares for and on behalf of the firm in an overseas
JV/WOS, where the entire funding for the investments has been done
by the firm provided the host country regulations or operational
requirements warrant such holding. www.AjmeraLaw.comAjmera
Corporate Services Pvt. Ltd. Slide 13 Establishing your business
internationally & Indian rules An Indian Party will have to
comply with the following rules: Receive share certificates or any
other documentary evidence of investment in the foreign entity as
an evidence of investment and submit the same to the designated AD
within 6 months. Repatriate to India, all dues receivable from the
foreign entity, like dividends, royalty, technical fees, etc.
Submit to the Reserve Bank every year, through the designated
authorized dealer, an Annual Performance Report in Part III of Form
ODI with respect to each JV or WOS outside India set up or acquired
by the Indian party. Report details of the decisions taken by a
JV/WOS regarding diversification of its activities/setting up of
step down subsidiaries/alteration in its share holding pattern
within 30 days of approval of those decisions by a competent
authority concerned with such JV/WOS in terms of the local laws of
the host country. These are also to be included in the relevant
Annual Performance Report; and In case of disinvestment, sale
proceeds of shares/securities shall be repatriated to India
immediately on receipt thereof and in any case not later than 90
days from the date of sale of the shares /securities and
documentary evidence to this effect shall be submitted to the
Reserve Bank through the designated authorized dealer.
www.AjmeraLaw.comAjmera Corporate Services Pvt. Ltd. Slide 14
Establishing your business internationally & Indian rules
Investment by an Indian individual: Investment by an Indian
individual: Automatic route limit is 125,000 US$ per person per
year- all other remittance allowed is not included. ( 3rd June
2014) Investment in real estate is not allowed as of 14 th August,
2013. Resident individuals can acquire/sell foreign securities
without prior approval in the following cases: If it is a gift from
a person residing outside India. If it is by way of Employees Stock
Option Plan (ESOP) issued by a company incorporated outside India
under Cashless Employees Stock Option Scheme which does not involve
any remittance from India. If it is by way of ESOPs issued to an
employee or a director of an Indian office or branch of a foreign
company or of a subsidiary in India of a foreign company or of an
Indian company irrespective of the percentage of the direct or
indirect equity stake in the Indian company.
www.AjmeraLaw.comAjmera Corporate Services Pvt. Ltd. Slide 15
Establishing your business internationally & Indian rules
Investment in foreign stock by an Indian individual can be held-
Investment in foreign stock by an Indian individual can be held- As
an inheritance from a person whether residing in or outside of
India. By purchase of foreign securities out of funds held in the
Resident Foreign Currency Account maintained in accordance with the
Foreign Exchange Management (Foreign Currency Account) Regulations,
2000 and By way of bonus/rights shares on the foreign securities
already held by them. Resident individuals are allowed under
General Permission to acquire shares of a foreign entity in
part/full consideration of professional services rendered to the
foreign company or in lieu of Directors remuneration. A resident
individual may acquire foreign securities by way of rights shares
issued by a company incorporated outside India provided the
existing shares were held in accordance with the provisions of
FEMA. www.AjmeraLaw.comAjmera Corporate Services Pvt. Ltd. Slide 16
Establishing your business internationally & Indian rules
Resident corporations and partnership firms registered under the
Indian Partnership Act, 1932 may undertake agricultural operations
including purchase of land incidental to such activity either
directly or through their overseas offices, provided: the Indian
party is otherwise eligible to invest and such investment is within
the overall specified limits, and for the purpose of such
investment by acquisition of land overseas the valuation of land is
certified by a certified valuer registered with the appropriate
valuation authority in the host country. www.AjmeraLaw.comAjmera
Corporate Services Pvt. Ltd. Slide 17 Establishing your business
internationally & foreign rules Open a Branch Office Open a
Branch Office Open/incorporate a NEW company and start a NEW
business Open/incorporate a NEW company and start a NEW business
Purchase or acquire an EXISTING business 100% (WOS) or Purchase or
acquire an EXISTING business 100% (WOS) or Partnership with local
business owner (JV) Partnership with local business owner (JV)
www.AjmeraLaw.comAjmera Corporate Services Pvt. Ltd. Slide 18
Establishing your business internationally & foreign rules 1.
Open a Branch Office: Incorporate an Indian company as foreign
company Buy/rent office premises or a virtual office to receive
communication Open a bank account Obtain necessary business
operation licenses Hire local staff to run and manage business
operation No transfer of employees from India to abroad Tax benefit
as expenses of foreign operation can be claimed in Indian tax
return www.AjmeraLaw.comAjmera Corporate Services Pvt. Ltd. Slide
19 Establishing your business internationally & foreign rules
2. Open/incorporate a NEW company and start a NEW business: (1/3)
Incorporate a company Buy/Rent office premises Open a bank account
Obtain necessary business operation licenses Hire local staff to
run and manage operation No tax benefit as expenses of foreign
operation cannot be claimed in Indian tax return
www.AjmeraLaw.comAjmera Corporate Services Pvt. Ltd. Slide 20
Establishing your business internationally & foreign rules 2.
Open/incorporate a NEW company and start a new business: (2/3)
There should be a relationship between the Indian company and the
foreign company such as holding company, subsidiary company,
associate company, etc. Must have a detailed business plan with 3
years of projection. Business in foreign country should be same or
related to the Indian business. Must be beneficial to the economy
of the foreign (host) country. www.AjmeraLaw.comAjmera Corporate
Services Pvt. Ltd. Slide 21 Establishing your business
internationally & foreign rules 2. Open/incorporate a NEW
company and start a new business: (WOS) (3/3) Transfer of employees
from India to abroad Managerial level or technical persons. Must be
working with the Indian company for at least 12 months in last 3
years. Must be at the managerial level OR have specialized
technical knowledge. Transfer can be on a temporary work permit
basis and may covert to permanent residence at a later time.
www.AjmeraLaw.comAjmera Corporate Services Pvt. Ltd. Slide 22
Establishing your business internationally & foreign rules 3.
Purchase or Acquire an EXISTING business - (WOS or JV): (1/3)
Incorporate a company Buy/Rent office premises Open a bank account
Obtain necessary business operation licenses Hire local staff to
run and manage business operation No tax benefit as expenses of
foreign operation cannot be claimed in Indian tax return
www.AjmeraLaw.comAjmera Corporate Services Pvt. Ltd. Slide 23
Establishing your business internationally & foreign rules 3.
Purchase or Acquire an EXISTING business - (WOS or JV): (2/3)
Business in foreign country should be same or related to Indian
business not necessary. Must be beneficial to the economy of the
foreign country by JV or WOS. Must have a detailed business plan
with 3 years of projection. There may be relationship between the
Indian company and foreign company such as holding company,
subsidiary company, associate company, etc. www.AjmeraLaw.comAjmera
Corporate Services Pvt. Ltd. Slide 24 Establishing your business
internationally & foreign rules 3. Purchase or Acquire an
EXISTING business (WOS or JV) : (3/3) Transfer of employees from
India to abroad Managerial level or technical persons. Must be
working with the Indian company for at least 12 months in last 3
years. Must be at the managerial level OR have specialized
technical knowledge. Transfer can be on a temporary work permit
basis and may convert to permanent residence at a later time.
Possibility of direct residency as well. www.AjmeraLaw.comAjmera
Corporate Services Pvt. Ltd. Slide 25 Establishing your business
internationally through Offshore company in a tax haven An Offshore
Company is a company incorporated for the purpose of operating
outside the country of its registration and/or the place of
residence of its directors, shareholders and beneficial owners.
There are a number of small island countries who have no personal
or business tax or Zero Tax Policy to attract investments from all
over the world. Famous examples: Mauritius, Cyprus, Isle of Man,
Gibraltar, Jersey island, Bahamas, Hong Kong, Singapore, Channel
Islands, Panama, British Virgin Islands, Luxemburg, etc. Slide 26
Establishing your business internationally through Offshore company
in a tax haven Reasons for establishing offshore companies: Reduce
tax Protect assets Manage risk Maintain privacy Avoid bureaucracy
Reduce costs Enhance assets www.AjmeraLaw.comAjmera Corporate
Services Pvt. Ltd. Slide 27 Establishing your business
internationally through Offshore company in a tax haven The
principal uses of offshore companies are: Trading Investing Holding
Financing Professional services or consultancy Patent, Royalty and
copyright holding Ship, yacht and aircraft management and planning
Personal and corporate tax planning www.AjmeraLaw.comAjmera
Corporate Services Pvt. Ltd. Slide 28 Establishing your business
internationally through Offshore company in a tax haven T The
following types of offshore companies are incorporated to structure
international business and for tax planning purposes: Very low or
zero tax offshore companies incorporated in jurisdictions often
described as tax haven islands. Companies incorporated in
jurisdictions which offer both offshore companies and onshore
companies and which may benefit from favorable tax regulations
and/or special offshore company regimes. Examples: Mauritius and
Hong Kong. www.AjmeraLaw.comAjmera Corporate Services Pvt. Ltd.
Slide 29 Establishing your business internationally through
Offshore company in a tax haven Offshore company formation: Takes
less than 2 days to incorporate Low cost of incorporation No
exchange control Very simple corporate law Privacy One company can
provide legal, accounting and banking services to manage operation
www.AjmeraLaw.comAjmera Corporate Services Pvt. Ltd. Slide 30
Establishing your business internationally through Offshore company
in a tax haven O ffshore banking: Familiarity with offshore and
international business Worldwide investment and business
perspective Tax-efficiency Confidentiality Lack of foreign exchange
controls Access to special investment opportunities
www.AjmeraLaw.comAjmera Corporate Services Pvt. Ltd. Slide 31
Prashant Ajmera, B.Sc. LL.B. (India) ICSA (UK) Indian Lawyer NRI /
OCI card holder Canadian citizen since 1999 Lived out side India
since 1988 Started international law practice in 1993 Associated
with law firms in many countries Now full time practice of
assisting SMEs & HNIs to establish business outside their home
country www.ajmeralaw.com www.AjmeraLaw.comAjmera Corporate
Services Pvt. Ltd. Slide 32 Q & A www.AjmeraLaw.comAjmera
Corporate Services Pvt. Ltd. Slide 33 Ajmera Corporate Services
Pvt. Ltd. Indian Law Office of Prashant Ajmera & Associates
[email protected] www.ajmeralaw.com + 91 99240 99570(India) +
1 514 697 1597 (Canada) + 1 212 461 0005 (USA)
