Home / Foreign Subsidiary Company Compliance

Updated on 20 Sep 2021  9.00 AM IST | 4 min read

An Overview to Foreign Subsidiary Company Compliance

As per income tax act, companies act, transfer pricing guidelines & FEMA guidelines, every foreign subsidiary company needs to maintain compliance like a proprietorship,partnership firm, LLP or a company. Foreign subsidiary company compliance mainly includes filing of income tax return to the income tax department, filing of annual returns to the ministry of corporate affairs (MCA) and other filings to authorities like reserve bank of India (RBI) or Securities exchange board of India (SEBI).

Like other companies, foreign subsidiary company also needs to comply with TDS regulations, GST regulations, ESI regulations etc. The requirement of compliance varies depending upon the industry, state of incorporation, number of employees & sales turnover. It falls in the category of annual, public and event based compliances.


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Mandatory Compliances For a Foreign Subsidiary Company In India

Mandatory compliances for foreign subsidiary company in India are as follows -

  • Filing Form FC-1 – Form FC-1 is filed by the subsidiary of a foreign company within 30 days after establishment and selection of business place in India. The form should be certified or authorized by RBI or other regulatory bodies in India.
  • Financial Statements – As per provision & regulations given in the schedule 11 of the Indian companies’ act 2013, every foreign subsidiary company active in India must prepare financial statements of its Indian business operations. These financial statements should be filed with registrar of companies (ROC) within 6 months from the end of the financial year of the foreign company. These financial statements must include the following information –
    • Statement of repatriation of earnings & profits
    • Statement connected with related party transactions
    • Statement of funds transfer involving concerned Indian subsidiary and any other companies or related parties of the holding foreign company.
  • Foreign subsidiary accounts – Every foreign subsidiary company should examine & verify their books of accounts by a practicing Chartered accountant of India.
  • Filing Form FC-3 – Form FC-3 is filed by foreign subsidiary company with registrar of companies (ROC) to provide details about the place of business & the financial records of the company.
  • Annual return – Every foreign subsidiary company has to mandatorily file annual returns in form FC-4 within 60 days from the end of its financial year. In addition to it, all documents distributed by subsidiary in India also need to be submitted to the ROC.
  • Validation/Authentication of the translated documents – All company related documents by subsidiary to ROC must be in English and all translated documents must be validated by a lawyer practicing in India.
  • Compliances under GSTN & income tax department.
  • Other annual & periodic compliances with ROC and other regulatory authorities.

Penalty For Non-Compliance foreign subsidiary company

In case of Non-compliance, foreign subsidiary company will be punishable with fine of not less than Rs.1 Lakh which may be extended to Rs.3 Lakh. In case of continuing offence, there is an additional fine of Rs.50000 every day. Every officer will also be punished with imprisonment for a term which may be extended to 6 months and a fine of Rs.25000 which may be extended to Rs.5 Lakh rupees or both.


Foreign Subsidiary Company Compliance FAQ’S

Foreign subsidiary company compliance mainly includes filing of income tax return to the income tax department, filing of annual returns to the ministry of corporate affairs and other filings to authorities like reserve bank of India (RBI) or Securities exchange board of India (SEBI).
Form FC-1 is filed by the subsidiary of a foreign company within 30 days after establishment and selection of business place in India.
Form FC-3 is filed by foreign subsidiary company with registrar of companies to provide details about the place of business & the financial records of the company.
In case of Non-compliance by foreign subsidiary company, there is a penalty of Rs.1 Lakh which may be extended to Rs.3 Lakh whereas in case of continuing offence, there is an additional fine of Rs.50000 every day and every officer will get imprisonment for a term which may be extended to 6 months with a fine of Rs.25000 every day which may be extended to Rs.5 Lakh or both.
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Due Dates

  • GSTR-7 Summary of Tax Deducted at Source (TDS) and deposited under GST laws

    Sep 10th ,2021
  • GSTR-8 Summary of Tax Collected at Source (TCS) by e-commerce operators under GST laws

    Sep 10th ,2021
  • GSTR 1 for Aug 2021 (turnover more than INR. 1.50 Crore)

    Sep 11th ,2021
  • GSTR-6 Details of Input Tax Credit (ITC) received and distributed by an Input Service Distributor (ISD)

    Sep 13th ,2021
  • GSTR-3B is a summary return to be filed by all taxpayers except those registered under the composition scheme, every month. However, from 1st January 2021, there is also quarterly filing option provided to taxpayers with annual aggregate tunrover of up to Rs.5 crore, opting for the QRMP scheme for Aug Month. (Aggregate turnover exceeding Rs.5 crore in the previous financial year)
     

    Sep 20th ,2021
  • GSTR-3B is a summary return to be filed by all taxpayers except those registered under the composition scheme, every month. However, from 1st January 2021, there is also quarterly filing option provided to taxpayers with annual aggregate tunrover of up to Rs.5 crore, not opting for the QRMP scheme for Aug Month. (Aggregate turnover up to Rs.5 crore in the previous financial year)

    Sep 20th ,2021