28 January 2014
Dear Sirs, Our Company is planning form company in US and make an existing Indian Pvt Ltd company as a fully Owned subsidiary of a US based company. Can some tell me about the formalities ? How the shares are transferred to foreign company from individual share holders ? Any capital gain tax applicable for such transfers.
Waiting for your valuable reply on this.Can guide me some who handle this Bangalore..
03 August 2025
Here’s a concise overview for your situation about forming a wholly owned subsidiary (WOS) of a foreign company in India and related formalities: 1. Setting up a Wholly Owned Subsidiary (WOS) in India Foreign company forms an Indian company (Private or Public Ltd) with 100% shareholding. Alternatively, existing Indian Pvt Ltd company can have shares transferred to the foreign parent company making it a WOS. 2. Share Transfer from Individual Shareholders to Foreign Company Shareholders need to transfer their shares to the foreign company via a share purchase agreement. Transfer must comply with: Companies Act, 2013 provisions. Foreign Exchange Management Act (FEMA) regulations. The foreign company must obtain Foreign Investment Promotion Board (FIPB) approval (if applicable) or comply with automatic route if allowed. Registrar of Companies (ROC) filings are necessary to reflect change in shareholding. 3. Capital Gains Tax Implications Capital Gains Tax is payable by individual shareholders on transfer of shares. Tax rates depend on: Holding period (Short-term vs Long-term capital gains). Residential status of shareholder. Tax treaty between India and the shareholder’s country of residence (e.g., US-India DTAA) may reduce withholding tax. Foreign company may be subject to transfer pricing provisions if shares are transferred at non-arm’s length prices. 4. Other Key Points Stamp duty may be payable on transfer of shares as per the respective State Stamp Act. Ensure due diligence on company’s liabilities before transfer. Post-transfer, foreign company must comply with Annual Compliance, including filing returns with ROC and RBI. 5. Professional Help in Bangalore Look for Chartered Accountants or Corporate Law firms specializing in: Foreign Direct Investment (FDI) Cross-border mergers and acquisitions Corporate compliance and taxation
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