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Presentation by: Prashant Ajmera (Advocate) B.Sc. LL.B. (India) ICSA (UK) Indian Law Office of Prashant Ajmera & Associates (Ajmera Corporate Services.

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Presentation on theme: "Presentation by: Prashant Ajmera (Advocate) B.Sc. LL.B. (India) ICSA (UK) Indian Law Office of Prashant Ajmera & Associates (Ajmera Corporate Services."— Presentation transcript:

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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)

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 Corporate Services Pvt. Ltd.

4 Indian Rules International Rules International Tax planning Indian Rules International Rules International Tax planning

5 Investing Abroad & Establishing Business Internationally Earlier, India Inc. was all about INVESTING IN INDIA – 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) Corporate Services Pvt. Ltd.

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 April to May As reported by Authorized Dealers in Form ODI Corporate Services Pvt. Ltd.

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 , , , , Aug-13 2, , , As reported by Authorized Dealers in Form ODI Corporate Services Pvt. Ltd.

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. Corporate Services Pvt. Ltd.

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. Corporate Services Pvt. Ltd.

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. Corporate Services Pvt. Ltd.

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. Corporate Services Pvt. Ltd.

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. Corporate Services Pvt. Ltd.

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. Corporate Services Pvt. Ltd.

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, 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. Corporate Services Pvt. Ltd.

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 Director’s 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. Corporate Services Pvt. Ltd.

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. Corporate Services Pvt. Ltd.

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) Corporate Services Pvt. Ltd.

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 Corporate Services Pvt. Ltd.

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 Corporate Services Pvt. Ltd.

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. Corporate Services Pvt. Ltd.

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. Corporate Services Pvt. Ltd.

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 Corporate Services Pvt. Ltd.

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. Corporate Services Pvt. Ltd.

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. Corporate Services Pvt. Ltd.

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.

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 Corporate Services Pvt. Ltd.

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 Corporate Services Pvt. Ltd.

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. Corporate Services Pvt. Ltd.

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 Corporate Services Pvt. Ltd.

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 Corporate Services Pvt. Ltd.

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 Corporate Services Pvt. Ltd.

32 Q & A Corporate Services Pvt. Ltd.

33 Ajmera Corporate Services Pvt. Ltd. Indian Law Office of Prashant Ajmera & Associates (India) (Canada) (USA)


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