Can Indian holding company give loan to foreign subsidiary?

Under the applicable law, an Indian subsidiary can raise debt from its foreign shareholder by way of external commercial borrowings (ECBs). However, this ratio is not applicable if the total of all ECBs raised by an Indian entity is up to US$5 million or equivalent.

Can a parent company be liable for its subsidiary in India?

As a principle a parent company cannot be held liable for the acts of subsidiary.

Is subsidiary of foreign company an Indian company?

A foreign subsidiary company is any company, where 50\% or more of its equity shares are owned by a company that is incorporated in another foreign nation. For a company to be a foreign subsidiary company in India, the company itself must be incorporated in India.

Do subsidiaries file their own taxes?

A subsidiary company is one that is owned and controlled by another company. Subsidiaries may file their own tax returns unless the holding company has an apportionment plan in place, to which all of its subsidiaries must agree.

Do subsidiary companies file tax returns?

A subsidiary company operating under the control of a holding company can file its own federal tax return provided no other corporation in the holding company’s control group files a consolidated tax return with the parent organization.

Can a company give interest free loan to its subsidiary?

No company can give loans at a rate of interest lower than the prevailing yield of one year, three years, five years or ten-years Government Security closest to the tenor of the loan.

Can a parent company loan money to a subsidiary?

Downstream guarantee (or guaranty) is a pledge placed on a loan on behalf of the borrowing party by the borrowing party’s parent company or stockholder. By guaranteeing the loan for its subsidiary company, the parent company provides assurance to the lenders that the subsidiary company will be able to repay the loan.

Can subsidiary be held liable for a parent company?

Indeed, a parent corporation that negotiates a contract but has its subsidiary sign it can be held liable as a party to the contract, if the subsidiary “is a dummy for the parent corporation.” A.W.

What other countries have subsidiaries?

A foreign subsidiary is a company operating overseas that is part of a larger corporation with headquarters in another country, often known as a parent company or a holding company. The parent company usually holds a controlling interest in more than 50\% of the foreign subsidiary’s stock.

Can an Indian company open a branch office in USA?

Opening a branch of an Indian company in the United States is a complicated task. The branch must fulfill some requirements to ensure the lawful presence in the United States. First, the Indian company needs to confirm if it is required to obtain approval from the Reserve Bank of India (“RBI”).

Why do foreign companies set up subsidiaries in India instead of branch offices?

The assets of the parent/foreign company are not subject to any attachments against the debts incurred by the subsidiary. Hence, the parent/foreign company would not prefer to take a risk and instead set-up subsidiary in India instead of branch office.

Can a foreign company have a subsidiary in India under DTAA?

Daimler Chrysler AG, it was held merely because a foreign company has a subsidiary in India, it is not a satisfactory proof to form a permanent establishment of the foreign parent company in India under the provisions of DTAA. The Finance Act, 2016 amended Section 6 of the Income Tax Act, 1961, to decide the residential status of a company.

What is a subsidiary company in India?

Under the Indian legislation, the subsidiary is treated as a separate legal entity. The Indian subsidiary falls under the regulations of the Income Tax Act and benefits from the same provisions applicable to companies registered in India.

Do branch offices of foreign companies pay higher rate of tax?

On comparing both the branch office as well as subsidiary company, it is amply clear that a branch office of a foreign company incurs higher rate of tax (CIT) as compared to a subsidiary company.