INTRODUCTION

This year, Brazil has elected the first market-driven president since the military regime, for keeping the promises to open up the Brazilian economy of investment and make the nation more ‘business-friendly‘.

According to strategists, the abundant global liquidity practised by banks around the world, coupled with a constructive economic agenda in Brazil, will create the best possible investment scenario, as Brazil will enjoy a period of exceptionally low-interest rates.

That is why the Brazilian economic market and digital commerce are even more ideal for international companies than they’ve been in the past.

In 2019, major companies like Novelis, Amazon and FIS are choosing to invest in Brazil. The reasons for investing in this country are numerous; some are based on the traditional advantages Brazil held and other ideas include new practices and enticements.

Another critical factor is that the Pension Reform creates a much more stable investment scenario than those in Argentina and Mexico.

Therefore, investing in Brazil now allows corporations to take advantage of a growing economy that willhighly benefit a company in the near future.

The Company interested in hiring foreign labour, whether permanent or temporary, must apply for a work permit from the General Coordination of Immigration, an agency of the Ministry of Labor and Employment. The Coordination is responsible for analyzing the request within a period of up to 45 days and depending on the merits of the application, may grant or reject the request.

The foreigner will have a period of ninety (90) days from his / her entry into the country, to prove the General Immigration Coordination his / her registration with the PIS / PASEP and the CPF / MF, as well as with the Class Organ, when dealing with regulated activity and subject to the professional supervision.This phase must be done in advance so that the process can be seen in a timely manner. To this end, the application will be by completing the “Work Permit Application Form”, signed and forwarded by its legal representative, or attorney, accompanied by the following documents as mentioned in the course of this research.

To offer a seamless process of international business Brazil has several treaties with different countries, i.e. in promoting the ease of doing business, Brazil holds double tax agreements (DTAs) with several countries. A double taxation Avoidance Agreement is a treaty entered between two countries for reducing the burden of paying double tax on the same income. It generally takes place between two countries where a person is earning income in one country and repatriating it in some other country. To avoid the confusion between the two countries on who will be the actual assessor of the person’s income this treaty is formulated. Due to Globalization business houses are going for expansion beyond the borders, it plays a significant role in deciding the net profit and net tax payable. Below is the list of countries that are a signatory with Brazil.

http://taxsummaries.pwc.com/ID/Brazil-Individual-Foreign-tax-relief-and-tax-treaties

INVESTMENT LAWS

Brazil offers an attractive destination for foreign investment. Brazil has very basic, sound legislation on FDI, which has been in force for over five decades. Brazilian law does not make a distinction between foreign and national investments. However, all foreign investors must appoint a representative in Brazil who, jointly with the representative of the company receiving the foreign investment, will be responsible for registering the operation with the Central Bank of Brazil's Foreign Direct Investment module (RDE-IED) in accordance with instructions laid out in www.bcb.gov.br.

 Registering foreign capital that enters Brazil is done electronically, using the Electronic Declaration Register on the Central Bank Information System.

Foreign investments are not subject to prior examination or verification by the Central Bank, except in specific economic sectors.

APPLICANT

a) Legal act governing the legal entity duly registered with the competent body or identity, in the case of an individual;

b) Act of election or appointment of its legal representative duly registered with the competent body;

c) Copy of the card of the National Register of Legal Entities - CNPJ, or the card of the Register of Individuals - CPF;

d) Power of attorney when the applicant is represented by proxy;

e) Original proof of payment of the individual immigration fee;

f) Other documents provided for Resolutions of the National Immigration Council.

CANDIDATE

a) Copy of the passport page containing the foreigner's number, name, date of birth, nationality and photograph;

b) Other documents provided by Resolutions of the National Immigration Council.

Employment contract:

The documents will be presented, if possible, in digital media, by the World Wide Web, provided that the guarantees of security of their authenticity are preserved, according to the Law.

The documents provided for in this article, once presented and digitized, will compose the applicant's electronic register with the General Immigration Coordination and their submission in subsequent new requests is not necessary, except in case of updating.

The notarization will not be required, except as provided by the law.

Note: This visa is withdrawn by the foreign worker still in his home country, at the diplomatic representation, where it is possible to make demands for more documents, besides those already presented by the company to the MTE.

Rights:

When working in the country, foreigners enjoy the existing rights under Brazilian law. Under the Constitution, foreign employees will have the same rights as Brazilians, and may even file a labour claim in relation to the period they worked in the country.

Visa:

The permanent visa is given to those who are legal representatives of the company in the country, as stated in the articles of incorporation or who will occupy an administrative position. The company must receive a foreign investment of at least R$ 600 thousand reais for each foreigner that wants to bring or R$ 150 thousand reais (per professional).

For foreigners, one of the most beneficial opportunities is the ‘Brazilian Investor Visa Program’. It allows anyone who is in a partnership with a Brazilian company, as well as anyone interested in investing in a real estate business, internet-based business, or interested in purchasing a government bond, the opportunity to gain permanent residence in Brazil.

TYPES OF ENTITIES

A. Limited Liability Company (“Limitada” / “Ltda.”)

To conduct commercial activities, Brazil has more than one form of the legal entity along with many other Latin American Countries. The most common legal entity structure in Brazil is the Sociedade LTDA. The Sociedade Limitada in Brazil has many features like Limited Liability Company in the U.S. or the UK. It is a legally separate entity and requires a minimum of two shareholders and has no minimum capital investment. It also allows for 100% foreign ownership. 

B. Limited Liability Corporation – S/A (“Sociedade Anônima” / “S.A.”)

Limited Liability Corporations in Brazil are regulated by a specific law (“Lei das SAs”). Those Limited Liability Corporations are considered as the closest form to US subchapter C corps. The Corporations can issue two different classes of shares,namely voting and non-voting. The liability of shareholders’ is to make payment of the shares to which the shareholders have subscribed. It is important to note that the foreign shareholders need a legal representative of the company in Brazil. Limited Liability Corporation is the ideal type of entity for larger companies who are looking to raise funds from the public.

C. SCP- Silent Partnership

When two or more members take part in business, trade, financial operations and divide profits as an unincorporated organization are known as Silent partnerships. These types of partnerships are mostly used in reforestation projects, real estate and hotel pooling.Also, this type of legal structure has a specific aim defined that the company will last only until the object of operations has been reached.

D. Consortium

A consortium means the gathering of corporations of the other companies with the aim of performing a determined activity or operation. They are unincorporated entities, where two or more members take part in business, trade, financial operations or ventures, and share profits.

E. Single Holder Limited Liability Entity (” Empresa Individual de Responsabilidade Limitada” / “EIRELI”)

EIRELIs is the most commonly used legal entity by individual entrepreneurs. The paid-in capital should be of minimum 100 times than the current minimum wage. The responsibilities of each shareholderare limited to the amount of his or her shares. However, it should be noted that all shareholders are liable for the payment of the corporate capital. Only individuals can be a shareholder and each individual can incorporate only one EIRELI. However, only Brazilians or foreigners with a permanent residency are authorized to create an EIRELI.

F. Branch Office of a Foreign Corporation

It is difficult to establish a branch office in Brazil as it takes about 6 months and the legal structures are high in cost. In order to be established, the company needs to operate under the same name as the company had in its origin country and must have a fully responsible company legal representative. For this, the company must prove its legal existence; submit various copies of articles of incorporation, latest balance sheet copy, list of shareholders and a copy of the resolution to open a branch office in Brazil. It is essential to allocate a certain amount of capital to the branch.

G. Incorporating a Brazilian Company

To expand the operations and access the Brazilian markets shall be done through the incorporation of a local Brazilian company.

Registration process for incorporating an Entity in Brazil

  1. For any person willing to set up a business entity should register with Board of Trade or Corporate Registry Office.

Any person interested in entering into a formal contract for establishing his/her business needs to submit common documents i.e. personal documents of each partner in partnership and in case of company a person needs to submit Articles of Incorporation clearly stating the interest of parties; company objectives and detail structure of corporate. For any documents to be valid should be verified by a lawyer.

MSME are exempt from this requirement.

  1. Following are the documents required for Incorporation of establishments:
  1. Articles of Incorporation or Individual Entrepreneur Application or Bylaws in three copies.
  2. Certified copy of the Identity Card (RG) and Taxpayer ID (CPF) of the owner or partners.
  3. Standard Application in one copy.
  4.  National Registration form in model 1 and 2 in one copy.
  5. Payment of fees through a bank slip.

Once a company registered after due process as required then such company receives a stamp or sticker provided by the Board of Trade or the notary, containing a unique identification number that is established in the incorporation of the Act. The owner of the company will receive in NIRE.            

  1. After a person receives NIRE he /she is eligible to get the National Register of Legal Entities, which identifies the company as a tax payer to the federal government. This registration can be done by any person online from the website of Federal Revenue Reserve.
  1. A person after the above process has to go to city town hall or Regional Administration for business licenses. This process is done at City Town Hall or Municipal Secretariat or Regional Administration. Following are the documents required for the process:
  1. City Hall Form.
  2. Approval of the address, through prior consultation.
  3. Copy of the CNPJ
  4. Copy of Articles of Incorporation.
  5. Survey Reports by Inspection agencies.
  1. The State Registration must be done at the office of State Financial Secretariat. Many of the firms have their agreement with Federal Reserve Service which allows the State Registration to obtain together with CNPJ. Any person incorporating a company has to mandatorily register the company with State Secretariat. The State Registration is necessary to register at ICMS. Following are the documents required for registration:
  1. Single Registration Document in triplicate form.
  2. Supporting Registration Document in one form.
  3. Proof of Address of partner, certified copy of original document.
  4. Certifying copy of rental agreement or any other instruments that gives a person a right to use the property.
  5. Tax registration number of an accountant.
  6.  Proof of registration under the ISS for service providers.
  7. For any entity which has been registered for the period of more than 3 months requires a Simplified Certificate by Board of Trustee.
  8. A copy of Incorporation Act.
  9. Copy of the CNPJ.
  10. Copy of Business License.
  11. RG and CPF of Partners.
  1. Any company complying the above procedure can start their operation in the country but two pre-requisite conditions should mandatorily followed by any company or partnership.
  1. A company has to register with social security within the stated period of 30 days from the registration.
  2. A promoter or partner have to be registered or should have authorization of the local government for printing of invoices and authentication of tax books.

http://www.brazil.gov.br/trade-and-invest/doing-business/basic-information-to-know-before-starting-a-business-in-brazil/starting-a-business

INTELLECTUAL PROPERTY RIGHTS IN BRAZIL

An intangible asset that is the result of creativity results in forming of Intangible asset. An intellectual property right is right of a person on his/her creativity, and it is important for a person to protect such property from being copied/ plagiarized.

Following are the protection allowed by Brazil authorities in case of Intellectual Property:

  1. Patents

A patent is a right granted to the owner of an invention that prevents others from making, using, importing or selling the invention without his permission. In Brazil, a person can make an application for right of priority only when the country in which such person resides is signatory to a treaty with Brazil or is a member of International Organization of which Brazil is also a member. The period for making application as per Paris Convention is period of 1 year and if the invention is of utility the period is 6 months. Patent protection provided up to the period of 20 years and if the invention is utility model the period of patent is 15 years from the date of filing of their respective application.

  1. Copyrights

Copyright is the right given to the owner of an original work. This right can subsist in literary works such as books and computer software, musical works, dramatic works, artistic works, sound recordings, films, broadcasts, cable programmers and the typographical arrangement of published editions of literary, dramatic or musical works, as well as artists’ performances. General protection of 70 years is provided for the work, after the death of the author or on the date of the first publication of work.

  1. Trademark

A trademark is a sign that distinguishes the goods and services of one trader from those of others. Typically a trademark can be words (including personal names), indications, designs, letters, characters, numerals, figurative elements, colors, sounds, smells, the shape of the goods or their packaging or any combination of these. A sign must be capable of being represented graphically in order for it to be registered as a trademark. A trademark lasts indefinitely so long as you register it every 10 years and it’s eligible for a renewal of 10 years after payment of fees on the expiry of the primary period. In Brazil, a person can make an application for right of priority only when the country in which such person resides is a signatory to a treaty with Brazil or is a member of International Organization of which Brazil is also a member. The period for making application as per the Paris Convention is a period of 6 months.

  1. Design

A design refers to the features of a shape, configuration, colors, pattern or ornament applied to any article or non-physical product that gives the article or non-physical product its appearance. It protects the external appearance of the article or non-physical product. The Industrial Design provides protection for 2D and 3D objects.  The Industrial Design protection will be available for a period of 10 years and additional protection will be paid for a period of 5 years in 3 succeeding slots after the period of 3 years subject to payment of the fees to be paid for renewal.  

  1. Geographical indication

A geographical indication (GI) refers to an indication used in trade to identify a product as originating from a particular territory which has given the product its special quality or reputation. The Geographical Indication is provided by the federal authority for only those who are actually established in geographical area.  

http://www.inpi.gov.br/english

Brazil is a part of several international treaties to accommodate international IP filings.

Conventions

Signatory

World Intellectual Property.

?

Berne Conventions

?

PCT

?

Paris Conventions

?

Madrid System

?

Doha

?

Universal Copyright Convention

?

Nice Agreements(International Classification of Goods& services)

?

Geneva Convention (phonograms)

?

First to use or First to File

First to File

* First to file: Applicants that are first to apply for registration of their marks are assigned trademark rights and priority, irrespective of whether the Applicants have used the marks in commerce or whether the marks were used in commerce first by others. 

Taxation policy of Brazil

Corporate tax

Also known as Imposto de Renda sobre Pessoa Jurídica (IRPJ).

Any person resident or non-resident having any business or conducting any business activities in Brazil will be covered under Brazilian taxation system. Such person conducting his/her business will be taxed on his/her operating income authorized by law.

Any promoter or director of any company established in Brazil can opt to be taxed under either of the method:

  1. Actual Income

Actual income method is where calculation of tax payable is done on the actual income received.

  1. Presumed Income

Presumed income is amethod where as per the provisions of law a deemed amount is calculated on which tax is applicable.The deemed taxable income system (Lucro Presumido) is an optional tax regime for companies whose gross revenue in the previous year was less than BRL 78 million and is calculated on a quarterly basis. The IRPJ and the CSLL are levied on deemed profits, which are determined by applying a specific percentage to the revenue of each quarter, plus other income and capital gains earned.

Any small or medium enterprise that has a gross income of less than 4.2 million BRL can opt to be taxed under simplified tax regime.

Rate of Taxation

A normal corporate income tax is estimated to 15%.The combined taxable rate of taxation is 34%. (Combined tax rate includes Sur Tax of 10 % and Social Contribution of 9% which is subject to change)

Capital Gains Taxation

There is no separate treatment for tax under capital gains. Capital gains are treated the same way as ordinary income (subject to restrictions on the offsetting of capital losses against ordinary profits in certain cases), i.e. any business entity earning the profits or any income as capital gains will be taxed in usual way of income tax.

Capital gains derived by a non-resident on an investment registered with the central bank are subject to progressive rates, as follows:

  • 15% until BRL 5 million;
  • 17.5% from BRL 5 million to BRL 10 million;
  • 20% from BRL 10 million to BRL 30 million;
  • 22.5% over BRL 30 million
  • 25% rate applies if the gains are derived by a resident of a tax haven (A tax haven is generally an offshore country that offers foreign individuals and businesses little or no tax liability in a politically and economically static environment).

Capital gains arising other than out of financial instruments are subject to income tax at 15%.

Sur Tax

Every entity has to pay certain amount calculated in form of percentage on income earned by any entity which surpasses the limit of 180,000 BRL. Sur Tax paid is calculated at 10% on the income.

Social Security

Every employer hiring/recruiting employees will have to contribute the funds estimating 8% to employees deferred account for the purpose of severance pay. Every employer is required to contribute 20% of the employees to employee’s pension fund additionally maximum amount of 8.8% contribution is paid to as other social security taxes.

PIS and COFINS are federal taxes imposed monthly on gross revenue earned by legal entities. The calculation method is generally non-cumulative, under which PIS and COFINS are levied on gross revenue at 1.65% and 7.6%, respectively, with deductions of input tax credits for expenses strictly connected to the company's business and prescribed by the regulating laws.

PIS: Program Social Integration is a fund or pool of fund used for the process of providing financial aid to unemployment insurance system. PIS is a mandatory employer contribution to an employee savings initiative.

COFINS: Contribution for the Financing of Social Security it is a pool of security created for financing social security.

Serial Number

PIS(Program Social Integration)

PIS intends to insure financial aid to unemployment insurance system

COFINS(Contribution for the Financing of Social Security)

COFINS is fund created to aid Social Security

Imported Goods

Economic Domain

Actual

1.65%

7.6%

-

Deemed

0.65%

3%

-

Combined Rate.

-

10%

PIS and COFINS

Combined Rate.

-

-

11.75%

9.25%

-

Royalties

The general withholding tax rate on royalty payments is 15%, unless the rate is reduced under a tax treaty. The Contribution for the Intervention in the Economic Domain (CIDE) also is imposed at a rate of 10%.

Other taxes

IPI

The IPI is a federal excise tax levied on manufacturer's sales and imports and sales carried out by importers. As a VAT-type tax, the amount paid on imports and other taxed inputs are usually recoverable as tax credits to be offset against company's IPI output debits. The tax rates range from 0% to 330% depending on the type of goods. Typically, the average rate for the IPI is 15%.

ICMS

ICMS is a VAT levied by the Brazilian states on the circulation of goods and the provision of interstate and inter-municipal transportation and communications services. The tax applies even when a transaction and the provision of services commence in another country. A noncumulative tax, ICMS is collected by most states at the rate of 17%, except for São Paulo and Minas Gerais, whose tax rates are 18%. There are also interstate rates of 12%, 7% and 4%, depending on the location of the recipient and nature of the transaction.

ISS

The tax on services or ISS, a municipal tax, is imposed on the supply of services, other than services subject to ICMS. The list of relevant services is found in Complementary Law 116/2003. The taxable base of ISS is the price of the service rendered. ISS is generally levied by the municipality in which the company that provides the service is established, although in exceptional cases, ISS may be levied by the municipality where the services are performed. ISS rates vary between 2% and 5%, depending on the municipality and the type of service.

Brazil does not levy stamp duty and branch remittance tax,

POLICIES IN BRAZIL

Following are the list of the incentives applicable for taxable income:

  1. Federal Incentives: Special Tax regime is available for some specific economic activity and some section for entrepreneur. Any person applying for such benefits needs to comply with provision or conditions mentioned by legislation in this behalf.
  2. State Incentives: State wise incentives will be provided by the state legislature to some specific business section. State legislature may provide incentives up to 95% of the value but varies from state to state.
  3. Municipal Incentives: Several Municipal authorities provide tax and non-tax benefit to promote investments and business expansion for overall economic growth.
  4. Regional Incentives: Brazilian government has implemented schemes and incentive plans to develop regions in the country.
  5. Other Incentives are provided by the government in various forms:
  1. The tax incentives provided by the government is on imported industrialized products through non-cumulative system.
  2. All expenses are exempted if applied for Research and Development. Deduction of extra of 160% is allowed for any research and development conducted which has a technological base or it is a technological based innovation from the income of IPRJ and CSLL.
  3. IPI exemption will be provided up to the rate of 70% till 31st December, 2019.

http://receita.economia.gov.br/information/

https://www.bakermckenzie.com/-/media/files/expertise/ma-resources/Doing_Business_In_Brazil.pdf

http://receita.economia.gov.br/orientacao/tributaria

CARRY FORWARDING OF LOSSES

  1. Startups can amortize or defer preliminary losses on the straight-line basis.
  2. Net operating losses can be carried forward indefinitely.
  3. The cap limit on carrying forward such loss is 30% of taxable income before the net operating losses are being reduced.
  4. Corporate Tax can be provided exemptions and reduction only in certain less developed areas. Corporate investing in less developed areas will be allowed to take tax exemptions.

COMPLIANCE REQUIREMENTS

It is necessary to understand all compliance requirements for Companies to steer away any legal problems in Brazil. Following are the points required to be followed by the private limited companies:

  • A tax year of Brazil is from 1st January to31st December.
  • It is mandatory for every company to file annual returns verifying relevant details of the directors, address of principle place of business, details of shareholder’s and their holdings of the company.
  • Each company must file a separate return; consolidated return is not allowed in Brazil
  • Every entity is required to file an annual tax return for the previous calendar year by theend of July.
  • Corporate taxes on due are usually adjusted against the annual profits of the company.
  • A private company of Brazil is required to maintain a local registered address.
  • It is necessary to appoint a Brazil legal representative to act as a sponsor in each foreign company. A legal representative can be a Brazilian or a permanent resident.
  • Foreign ownership is restricted in the nuclear energy industries, health services, aerospace and postal services.
  • In Brazil, employers need to provide additional benefits like health benefits, life insurance, dental plan, meal allowances, employee loans, pension funds, medical checkups, prescription drug benefits for employees.
  • Public companies must publish annual financial statements in a national newspaper, though they need not be audited. It is not necessary for Brazilian LLCs to publish annual financial statements.
  • Commercial companies are required to publish a balance sheet, profit and loss statement, statement of Cash flows and the financial statements annually.

CONCLUSION

As per the report of World Bank ranking with regards to the ease of doing business, it can be concluded that Brazil is a relatively tough place to start a business as the country had ranked 120th out of the participating 183 countries in the survey to check the ease of doing businesses in different countries around the world. But that does not take away the fact that Brazil is a profitable country where businesses if started well, can thrive and truly be able to earn its best potential.

As stated by Carl Farrel, the Chief Revenue Officer at data analytics powerhouse SAS, “Brazil is very resilient, it will weather the crisis and continue to prosper — it’s an economy that’s got lots of resources, people, and all the geographic connections that it needs.”

INTRODUCTION

India is a country with a population of 1.3 billion people, and it is termed as an emerging market for every product and service sold by corporations around the globe. India is a country whose foundation was built on the pillars of sovereignties, sociality, secularism and democracy and it will always provide immense opportunities for doing business, business is a business that will never face recession.

This pace at which our economy is growing, it is expected that India will soon bea heaven for launching new businesses. India hasa history that relates to people doing businesseseven when the world at large was busy establishing a civil administration in their countries. Anecdotes of handloom factories had been the case to study for not just Indians but also for students abroad.

The change in government policies and the implementation of those policies as per their ideologies, rooting towards the development of the country, was all directed to grow and attain an economy based onbusiness expansion in India. With launching various schemes and credit policies the government is trying to push people to start a new business, which in turn will not only help the government but will also create employment opportunities for the public at large, making it a vehicle for not just economic but for the overall development of the Indian society. India, though in its later development stage realized the complication faced by people for doing business, has launched various schemes to provide aid in catalyzing the process of incorporation of abusiness.

Such schemes as explained below in this research  paper will give you a brief view of the endeavours by the Indian government towards business development in India.In terms of the statistical data India has jumped to number 30 in terms of doing business as per the ranking provided by the World Bank. It is also listed in top 100 companies among the rankings provided.A recent change inthe indirect taxation structure by creating a single unified indirect tax system enhanced the viability of business entities that makes it attractive for new entrepreneurs to introduce a business unit in India. Introduction of Insolvency and Bankruptcy Code is an effort made to resolve the complication on stressed assets which were causing complications in the functioning of a business process. Digital interference was a step ahead to provide a platform for covering the preliminary aspect of the business that eliminates the age-old process by bureaucrats, making it less in terms of physical interactionwhich provides more transparency in affairs of doing business.

REGISTRATION PROCESS OF A COMPANY

There are various rules and regulations as per the Companies Act that needs to be followed by a person who wants to register a public limited company; following are the rules:

  1. Minimum Shareholder

A minimum number of the seven shareholders are required to form a public limited company.

  1. Minimum Director

A minimum number of three directors are required for the purpose of the registration of a public limited company.

  1. Minimum Capital

A minimum capital of rupees five lakh is required; there is no cap limit on the capital investment.

  1. Digital Signature Certificate

A Digital Signature certificate from one of the director is required at the time of submitting the self-attested copies of address proof and identity proof of other directors and people associated with the company.

  1. Director Identification Number

Every director who accepts the proposal to be the director of the company shall have a director identification number for the registering as a director during the registration of the company.

  1. Application for Name

An application has to be made by the promoters of the company for the name under which the company is going to be registered and the name which is going to be promoted to the world at large.

  1. Object clause

A company needs to add the object clause in the charter document of the company stating the object of the company along with the purpose for which the company was incorporated. Every company incorporated under the companies act should have the charter document known as Memorandum of Association.

  1. Documents submission and payment of fees

A set of documents such as Memorandum of Association, Articles of Association, DIR 12, INC-7 and all other related documents prescribed by the Act need to be submitted along with prescribed non-refundable fees for completing the registration process.

  1. Application for Business Commencement

After receiving the consent or in-principal approval after a thorough examination of documents submitted by ROC, the company has to apply for the certificate of commencement.

DOCUMENTS REQUIRED FOR INCORPORATION OF THE COMPANY

Directors who are Indian nationals accepting the proposal for being a director in the company should have the following document as a prerequisite condition for employment in the company:

  1. Pan Card- A copy of pan card should be submitted by the director of the company for the process of incorporation. A pan card is a document containing a unique identification number provided by the department of income tax, which eventually forms a core document for the process.
  1. Address Proof - Every director employable in the company has provided with an address proof that will form a part in proving the Indian Nationality of such director. Following is the list of the documentation required as address proof:
  1. Passport
  2. Election Card or Voter Identity Card
  3. Ration card
  4. Driving License
  5. Electricity Bill
  6. Telephone Bill
  7. Aadhaar Card
  1. Residential Proof- A residential as an additional proof should be submitted with address proof, to confirm the current address of the director. Following is the list of the documents to be submitted as the residential proof:
  1. Bank Statement.
  2. Electricity Bill.
  3. Telephone Bill.
  4. Mobile Bill.
  1. Registered office proof - Along with the Pan cards address proof and residential proof, a proof of registered address of the company should be submitted for completion of the process of incorporation. Following are the document to be submitted as proof of the registered office of the company:

Registered document of title of the premises of the registered office of the company in the name of the company.

Or

A notarized copy of rent or lease agreement of the registered office of the company along with the rent paid receipt, which should not be more than one month old.

  1. Shareholder’s details - Every company needs to submit the details regarding the shareholder subscribing to the Memorandum of the company, with the similar documents provided by the directors, i.e. pan card, aadhaar card, identity proof and residential proof.

If the shareholder is a judicial person and not a natural person such personality should submit a notarized copy of documents such as INC-9, MOA, AOA drafted by the  professionals along with the mentioned documents a copy of the certificate of incorporation and a copy of board resolution passed stating the subscription to share of the company.

PROCEDURE FOR CHOOSING A NAME

A name of the entity should always be registered, but before registration director/ directors or promoter/ promoters should decide the name that is going to reflect in books/ register of ROC at the time applying for incorporation. A name should be divided between three parts 1) Name 2) Object 3) Constitution. Name of the company will be unique name decided by the promoters and directors and object will the reason/ purpose for which a company is incorporated and constitution will manifest what the company is registered for, for example, private limited, public limited, limited liability partnership, limited liability company, etc.

CAPITAL

A collective amount invested by people at times of incorporation for carrying out the affairs of the company is known as the capital of a company. Capital is usually divided between two parts “Authorized capital” and “Paid-up capital”.

Authorized Capital means the amount of capital authorized by the act after making an application in this behalf by the promoters.

Paid-up capital is an actual amount of money invested by the shareholder/ pre-issue shareholder / promoters in the company as to limit/ authorized capital.

DIFFERENT TYPES OF BUSINESSES

A person willing to launch a business in India has various option to start a business;they are as follows:

1. Private Limited Company

In the Private Limited Company, personal assets are different from business assets. Every shareholder is responsible for his share of the total capital. Private Ltd Companies need to maintain the records of financial transactions, board meetings, annual reports and so on.

A Private Ltd company consists of a shareholder, whereas the total capital of the entity is made up of shares. The shares can be sold or transferred to another individual who then becomes one of the owners of the company.

2. Partnership

Partnership business entities are similar to a sole proprietorship. The main difference between partnership and sole proprietorship is that two or more members are necessary to form a partnership. The responsibilities, roles and the share of the partners are always defined in an executed partnership deed.

Examples of partnership firm are as follows:

  1. Twitter: It is founded by Evan Williams, Biz Stone, and Jack Dorsey and is an outstanding example of prosperous business partnership.
  2. Google: The founders of the google, namely Sergey Brin and Larry Page, ran a small search engine decade ago and turned it into the leading search engine in the entire world.

3. Limited Liability Partnership

A limited Liability Partnership firm is unlikethe partnership firm as personal assets are different from the business assets. In case if the business incurs any damages, the personal assets of partners are not at risk, as share capital in an entity that defines the maximum liability of every partner.

As compared to Sole Proprietorship and Partnership, Limited Liability Companies always has good credibility among the investors. The primary reason includes the maintenance of incorporation, tax and financial records.

4. Sole Proprietorship

A company registered in the name of a single person is called Sole Proprietorship. That sole person is wholly responsible for the welfare of the entire business. The owner funds the business, takes the profits and bear the losses.

Do you know that companies like Coca-Cola, Apple, Hewlett-Packards, Amazon, etc. all started their company as Sole Proprietorship companies in India.

5. One Person Company

One Person Company (OPC) is a newly proposed type of company and is introduced in the Companies Act, 2013 in order to support entrepreneurs who are capable of starting a venture by allowing them to create the entity by an individual. The main advantage of an OPC is that only one individual can start the company, whereas,in case of Limited Liability Partnership, minimum two members are necessary for incorporation and maintenance.

An OPC is a separate legal entity as per company which offers limited liability protection to its shareholders and has continuity of business and is accessible to incorporate.

6. Section 8, a Company:

According to Section 8, a company is an organization which is registered as a Non-Profit Organization (NPO). NPO/company has its objective of promotion of arts, commerce, charity, education, protection of the environment, science, social welfare, sports, researchand intends to apply its profits, if any, or other income in promoting its objects.

GST REGISTRATION

GST (Goods & Service) Tax is the biggest tax reform that took place in India catalyzed the business process in the country. A unified tax system is launched by the government, where tax applicable would differ on the basis of the good and services, the government has eliminated all other complications as compared to previous tax structure, i.e. value-added tax and service tax. Every business is compelled to register under the new tax system in both cases, either the business being of goods seller or service provider. There are some mandatory compliances for all the businesses in the country, avoiding which may attract a penalty.

Eligibility for registration under GST

Service provider: - Any person providing services in the aggregated value of “twenty lakhs” rupees for a period of one year needs to obtain GST registration. In some special categories, a service provider providing his services for an aggregate value of “Ten lakhs” rupees in a year should obtain GST registration.

Goods Supplier: -Any supplier supplying goods of the value aggregate of rupees “Forty Lakhs” should obtain GST registration. For any person to be eligible for the privilege of “forty lakh” benefits need to comply with the condition mentioned as per the GST rules. Any person other than the person eligible for the forty lakh benefit should obtain registration once he/she sells the goods aggregating “twenty lakhs” and in some special category, the aggregate amounts is “ten lakhs” rupees.

DOCUMENTS REQUIRED FOR GST REGISTRATION

  1. Pan card of the applicant willing to register/ obtain the GST registration.
  2. Any proof of business registration or certificate of incorporation.
  3. Identity and address proof of promoters with photographs.
  4. Address proof of the business place or proof of the registered office of the company.
  5. A bank account statement viewingthe name, address and a few transactions.
  6. Class 2, digital signature for the authorized signatory.

INTELLECTUAL PROPERTY RIGHTS

Trademark

It is a mark capable of distinguishing the goods or services in connection with which it is used in the course of trade in respect of origin, material, mode of manufacture of goods or performance of service quality, accuracy or other characteristics of goods or services not so certified or registrable a such under chapter IX of those goods or services in the name, as proprietor of the certification trademark, of that person.

For any company which expects an authority under Trademark Act, 1999 to protect its distinct products and services from other companies needs to register their logo, signboard or any other distinct symbol under the Trademark Act, 1999.

Patent

A patent is essential to a company because it can help to safeguard one’s invention, innovation or an idea. It can protect any product, design or process that meets certain specifications based on its originality, practicality, suitability, and utility.

Copyright

Copyright is a right given to the creators of literary,  dramatic, musical and several other works of the intellect. It usually means that only the creator has the right to make copies of his or her actions or prevents others from making copies. The central idea behind such protection is the premise that innovations require incentives. Copyright recognises this need and gives it a legal sanction. Copyright protects all of them.

CONCLUSION

While corruption still exixts, digitalization and computerization of various departments has led to more efficacy in their working. Business institutitons like SEBI and RBI have become more vigilant and proactive in dealing with domestic and foreign investment.

Since decades india has been a semi-socialist state and although it still has a long way to go, India will continue to be an atteactive destination for business and investment.

A Company can be defined as an association which is formed by natural persons, legal entities or mixture between the two and the main purpose of the company is to develop commercial activities under the Indian Companies Act, 2013. The term ‘Company’ is defined by various legal experts. Section 2(20) of the Companies Act, 2013, defines the ‘Company' as follows: "Company means a company incorporated under this Act or under any previous company law."

SIX TYPES OF COMPANY REGISTRATIONS IN INDIA

1. Private Limited Company

In the Private Limited Company, personal assets are different from business assets. Every shareholder is responsible for his share of the total capital. Private Ltd Companies need to maintain the records of financial transactions, board meetings, annual reports and so on.

A Private Ltd company consists of a shareholder, wherein the total capital of an entity is made of shares. The shares can be sold or transferred to another individual who then becomes one of the owners of the company.

Private Limited Company consists of three types:

i) Company limited by shares: The company where the members are having its limited liability by the memorandum, if any, unpaid by the members.

ii) Company limited by guarantee: It is a company consisting of limited liability of its members by the memorandum to such amount as the members may respectively undertake to contribute the assets of the company in the event of its winding-up.

iii) Unlimited company: A company that has no limit on the liability of its members is called as an unlimited company.

Here are a few examples of the private limited Companies: Flipkart, Parle, Snapdeal, Pepsi, Book my Show, etc.

2. Partnership

Partnership business entities are similar to a sole proprietorship. The main difference between a partnership and sole proprietorship is that two or more members are necessary to form a partnership whereas you need only one proprietor for a sole proprietorship. The responsibilities, roles and the share of the partners are always defined in the executed partnership deed.

The profit-sharing ratio is defined by the partners in their partnership deed. In the case, if any loss incurs, each of the partners is responsible personally. Personal assets of partners can be used to compensate the losses incurred if any as decided by the partners.

Examples of a partnership firm are as follows:

  1. Twitter: It was founded by Evan Williams, Biz Stone, and Jack Dorsey and is an outstanding example of prosperous business partnership.
  2. Google: The founders of the google, namely Sergey Brin and Larry Page, ran a small search engine decade ago and turned it into the leading search engine in the entire world.

3. Limited Liability Partnership

A limited Liability Partnership firm is different from the partnership firm as the personal assets are different from the business assets. In case if the business incurs any damages, the personal assets of partners are not at risk, as the share capital in entity defines the maximum liability of every partner.

As compared to Sole Proprietorship and Partnership, Limited Liability Companies always has good credibility among the investors. The basic reason includes the maintenance of incorporation, tax and financial records.

4. Sole Proprietorship

A company registered in the name of a single person is called Sole Proprietorship. That sole person is wholly responsible for the welfare of the entire business. The owner funds the business takes the profits and bear the losses.

Do you know that companies like Coca-Cola, Apple, Hewlett-Packards, Amazon, etc. all started their company as Sole Proprietorship companies in India?

5. One Person Company

One Person Company (OPC) is a newly proposed type of company and is introduced in the Companies Act, 2013 in order to support entrepreneurs who are capable of starting a venture by allowing them to create the entity by an individual. The main advantage of an OPC is that only one individual can start the company, whereas, in the case of Limited Liability Partnership, a minimum of two members is required for incorporation and maintenance.

An OPC is a separate legal entity as per company which offers limited liability protection to its shareholders and has continuity of business and is accessible to incorporate.

6. Section 8, an NPO Company

According to Section 8, a company is an organization which is registered as a Non-Profit Organization (NPO). NPO Company has its objective of promoting arts, commerce, charity, education, protection of the environment, science, social welfare, sports, research, and different religion. It intends to apply its profits, if any, or any other income in promoting its objects.

CHOICE OF LEGAL STRUCTURE FOR BUSINESS

It is fairly advisable to choose the legal structure appropriate for the business as it will not only attract liability to choices but also will require the legal documenting as per the perquisites mentioned by the Companies Act, 2013 for the registration of the entity under different forms. The entity is constructed of different forms of organizational headings under which a person willing to open the business can register for carrying out the activity.

There are risks associated with the type of business a person would wish to register himself. Applicable taxes for different organizations are different, so choosing one’s business wrongly may lead to attracting that sort of tax liability. Also, a person has to raise funds required for establishing/ registering the business as to what he/she chooses.

For the formation of entities and registering as per the requirements, one needs to file various documents and has to meet the deadlines prescribed by the law regarding personnel, duration and capital that is required for such registration.

Considering the various laws enacted for different purpose of regulating different types of business, it is important for a person to choose the correct structure for himself in recognizing the law applicable for such business and to avoid violation of the provisions attracting penalty under each head.

Such individual incorporating the business needs to make a choice under which industry he/she is expecting to carry out the activity. For the smooth functioning of business, it is important to maintain a structure that suits the demand and provides the desired results. The correct structure will also give legal protection against the world.

INTRODUCTION

A Company is a legal entity formed by a group of individuals to engage in and operate a commercial business or an industrial enterprise. A company includes not just employees and employers but also includes shareholders, partners andsuch other decision makers. As the exponential growth in the corporate market has taken place, there’s a growing number of people’s involvement, for the purpose of wealth maximization. A company has to register to give a legal identity to its existence in order to receive the full benefits provided by the legislation on this behalf.

Companies Act, 2013 is the recent Act regulating corporate affairs in India. India being a population of 1.3 billion people out of which some form a company and some work for a company, it was important to invent rules for a company to work in the paramount interest of people at large. A public limited company works in a combination of people outside of the company as well as people operating from the inside of the company.

FEATURES OF PUBLIC LIMITED COMPANY

Difference between owners and directors

A company registered under the Companies Act has made a clear distinction between the people who own the company and the people who administer the company. The company is formed by collective units which are owned by people who purchase that part of the company with their money; such unit is known as Share, the person who owns the shares is known as a Shareholder and the price for which he purchases the share is known as the share price. The person who administers the business is known as the directors of the company.

Limited Liability

Every company that is formed as a public limited company under the Companies Act is inclusive of limited liability feature that states that a person who invests in the company via shares should have his/her liability limited to the unpaid value of the share price. Liability of the company will not be borne by the owner of the share.

Separate Existence

A Company registered under the Companies Act will always have separate existence in terms of its member/ owners or any other person associated with the company. A company after registration becomes a legal entity in the eye of the law. Every person associated with the company will not be liable for any act except as stated by law.

Paid Up Capital

Every company under the Companies Act is formed by the collective amount of money introduced and invested by the people buying shares of the company. The amount invested by the people against this share in a company is collectively called as paid-up capital of the company.

Prospectus

A prospectus is the document of the company which is similar to an offer letter for the parties who intend to invest in the share capital of the company or intend to become a shareholder in the company. Prospectus of the company should mention all the necessary requirement as pescribed by  the companies act, failing which may attract a penalty.

Name

As after registration a company is formed as a separate entity it has to register or make an application for registration under a name. The authority under Companies Act has to check the availability for a name for which a company had applied.

Separate Property

A company is a separate legal entity and hence can acquire any property under its own name and no person associated with the company can claim the company’s property to be his property.

Transferability of Shares

Shares are a unit of the share capital of the company is of transferable nature, a person owing a share of the company can sell his share to any other eligible person as per the procedure mentioned in the act.

Can be sued in own name

A company as a separate person can sue any other person or can be sued in its own name.

Common Seal

A company for affixing or affirming any contract or agreement or transaction conducting its name uses a common seal. A common seal is a type of signature of the company used for entering into a contract in the name of the company.

REGISTRATION PROCESS

There are various rules and regulations as per the Companies Act that needs to be followed by a person who wants to register a public limited company following are the rules that are a prerequisite for registration:

Minimum Shareholder

A minimum number of seven shareholders are required to form a public limited company.

Minimum Director

A minimum number of three directors are required for the purpose of the registration of a public limited company.

Minimum Capital

A minimum capital of rupees five lakh is required; there is no cap limit on the capital investment.

Digital Signature Certificate

A digital signature certificate from one of the director is required at the time submitting the self-attested copies of address proof and identity proofs of other directors and people associated with the company.

Director Identification Number

Every director who accepts the proposal to be the director of the company requires a director identification number.

Application for Name

An application has to be made by the promoters of the company for the name under which the company is going to be registered and the name which is going to be promoted in the market.

Object clause

A company needs to add the object clause in the charter document of the company stating the object of the company, the purpose for which the company was incorporated. Every company incorporated under the companies act should have the charter document known as Memorandum of Company.

Document submission and payment of fees

A set of documents such Memorandum of Association, Articles of Association. DIR 12 and INC-7 and all other documents prescribed by the Act need to be submitted along with the prescribed non-refundable fees for completing the registration process.

Application for Business Commencement

After receiving the consent or in-principal approval after a thorough examination of documents submitted by ROC, the company has to apply for the certificate of commencement.

CONCLUSION

Being a public limited company, it is able to offer its share to the public; this provides an opportunity for the company in having better access to capital. With all the privileges and exemption provided by the legislature, it is always better to choose a public limited company for setting up the business. A public limited company with an interest of the public in its working helps the promoters for their value maximization. As with humongous area of working, a public limited company is always governed by the corporate laws of the country, providing a safe environment to its stakeholders. With a huge capital, significant expansion and immense capability of creating employment, this form of business is appropriate for helping the country to shape its economy.

In India, Private Limited company is the most prevalent type of corporate legal entity. It is a business entity held by small groups. A private limited company is always registered for the pre-defined objects and owned by the members called as shareholders. Start-ups and business with the higher growth of aspiration mostly choose Private Company as a suitable business structure.

The registration of the Private Limited Company is governed by the Companies Act, 2013, along with Companies Incorporation Rules, 2014. The governing body of private limited Company is the Ministry of Corporate Affairs, known as MCA. A Private Limited Company is as a company having a minimum paid-up capital which restricts the right to transfer its shares, limits the number of members to two hundred as opposed to the previous fifty and inherits the prohibition to invite the public to subscribe for any securities of the Company.

MEMBERS OF A COMPANY

Shareholders of the company are known as members, whereina minimum of two members are required to form the company. An individual or a body corporate can be a member of a Company.

In order to calculate the number of members in the company, the following shall be considered:

  1. If two or more persons jointly hold shares in one company, they shall be considered as one shareholder.
  2. The persons who are the employee of the Company and the person who has been an employee of the company were the members of the company before ceasing the employment shall not be included in the number of members.
  3. ESOP provides equities to a person in the employment of the Company(Employee Stock Ownership Plan generally known as ESOP is the benefits plan for employees that provide workers ownership interest in the Company).

REGISTRATION PROCESS:

The MCA has established easy steps to incorporate the company by rolling various changes in the process of registration. The major changes implemented by MCA pertaining to the registration of Private Limited Company are as follows:

Approval of Name of Company in the form of RUN (Reserve Unique Name)

The incorporation of Company shall be initiated by reserving its unique name with prior approval or by using SPICE form. The incorporation certificate is provided if the name of the company is acceptable by MCA. SPIC stands for Simplified Per Forma for Incorporating Company Electronically. MCA introduced RUN Form to reserve the name of incorporating companies.  The requested name would be checked by MCA personnel at Central Registration Centre against the companies, LLP and trademarks to avoid similarities. If the name is unique it will be approved by MCA and the applicant would be intimated via email.

Digital Signature of the Company:

Digital Signature must be obtained for the directors and is required for signing the Incorporation Application. However, it is not mandatory for the approval of the name of the company.

Director Identification Number:

It is mandatory to have Director Identification Number by the director of the Company, which is commonly known as DIN. The DIN could be obtained by any person filing form of DIR-3 or through the SPICE Form.

  1. Form of DIR-3:

As per the registry of MCA, Form of DIR-3 can be used only by the existing companies for adding the new director of the company. The DIR-3 Form has included the provisions requesting CIN (Corporate Identification Number) of the Company to which director would be added.

  1. SPICE:

A person who is willing to incorporate a new company can apply for DIN by SPICE Form where details of directors must be filled along with PAN or Passport details.

No Incorporation Fee:

The MCA in an effort to simplify the process of registration of Company and encourage the Start-ups has announced zero fees for the incorporation of Companies.

MOA and AOA:

MOA is the document containing all fundamental information required for the incorporation of the company. It is a document which is considered as the draft prepared by the company validated by law for its functioning in successful form. Some important clauses to be included in MOA are the name clause, subject clause, clause mentioning the registered office of the company, liability clause, capital Clause, etc. MOA is a mandatory document to be filed with ROC (Registrar of Companies) at the time of Incorporation.

AOA is the draft which includes the rules and regulations to be followed by the Company; it also contains the layout of internal management of the Company. AOA includes the allocation of shares, Intellectual property rights, division of profits, alteration of capital, the procedure to held general meetings, borrowing powers, dissolution of the company, etc.

Incorporation Certificate:

After MCA approves the MOA and AOA of the company, the company gets the Incorporation Certificate, including the date of incorporation and PAN number of the Company.

LIMITATION

The limitation to a private limited company is to issue the shares as it restricts the same to its members, unlike Public Limited Companies. The private Limited Companies can take loans from the Shareholders and Directors, whereas Public Limited Companies can issue its shares to the public. Also, the shortcoming of Public Limited Company is that it has more compliance as compared to sole proprietorship or LLP.

MANDATORY COMPLIANCES

The mandatory Compliances to be made by the private Limited Companies include the following:

  1. Allotment of Securities as each member or subscriber to MOA should deposit the subscription money for shares and the company should deliver certificates of all securities post-incorporation.
  2. Filing an Annual Return and Financial Statements of holding Annual general meeting.
  3. Appointing the Auditor and maintaining the statutory audit of accounts to be conducted by appointing statutory auditors for the company.
  4. Private Limited Company should held atleast four board meetings in a year where the presence of director is important for meeting along with proper quorum.  It is necessary to prepare and maintain the minutes to be preserved at the Registered Office of the Company.
  5. Appointment of Managing Director and Resignation of Director,
  6. Allotment and Transfer of Shares along with receipt of Share application money.

REASONS BEHIND PRIVATE LIMITED COMPANY PREFERRING START-UPS:

Private Limited Company is the preferred structure by start-ups due to the growing opportunities and stability.

  1. Private Limited Company assures the separate entity and legal existence from the members of the company
  2. It can get involved in contracts and legal proceedings
  3. Change in members and management does not affect the status of the Company.
  4. It eases the funding process by offering variours equity options and debt instruments to the promoters and the investors.
  5. Private Limited Company has a Separate Managerial Board where the Board of Directors works on remuneration and members receive profit-sharing in the form of a dividend.
  6. It can take benefit of registration under Startup Scheme laid by Government as this scheme avails the benefits including exemptions in taxes.

Limited Liability Partnership (LLP) is a form of alternative corporate business which provides flexibility as that of a partnership and the benefits of limited liability of a company.Limited Liability is the type of legal structure where the corporate loss will not exceed the amount invested in the business. It means the assets imputed cannot be seized to repay debts attributed to the company. LLP can continue their existence even after a change in partners. It is capable of entering into contracts and holding property in its name.

Also, LLP is a separate legal entity and is liable to the full extent of its assets. The accountability of partners is limited to their agreed contribution in an LLP.Further, no partner is responsible on account of the individualistic or un-authorised actions of other partners; thus, individual partners are protected from joint liability for wrongful decisions or conduct of another partner’s.The LLP, however, is not released of the liability for its other obligations as a separate entity.

CONCEPT AND HISTORY OF LLP IN INDIA

The concept of LLP was initially introducedin 1957. The suggestion was that the limited liability of partnership should be recognized in India either by enacting a special act or inserting new clauses in the existing Partnership Act. However, this suggestion was rejected by the Commission. In 2003, while discussing the regulation of private companies and partnership, the Naresh Chandra Committee stressed on the need for limited liability partnerships in India.

After several suggestions and recommendations, the bill of LLP received the President's assent  toenforce the LLP Act  Hence, the formation and the regulation of LLP is  governed by the Limited Liability Partnership Act, 2008 and Limited Liability Partnership rules, 2009.

The need for the LLP Act was introduced by realizing the growth of the Indian Economy and the role played by entrepreneurs and professionals of our country. The combination of the initiative of entrepreneurship to operate in a flexible, innovative and effectivemanner provide a further impetus to the economic growth of India. The need forestablishing a new corporate form was felt, that could provide an alternative to the traditional partnership practice with unlimited liability.

STRUCTURE OF AN LLP

The structure of anLLP has proven advantageous providing professional services with utmost productivity. Nowadays, India is attracting FDI in entrepreneurial projects carried in the format of LLP, which encourages the small entrepreneurs to explore business with foreign investments. The structure where the different members are willing to start a business by controlling certain segments and further bear their responsibilities can conveniently use the LLP structure.

By following the provisions specified in the Limited Liability Partnership Act, 2008, LLPs should be registered under the provisions of the Companies Act, 2013with the Registrar of Companies (ROC) and all LLPs shall have their registered office. An Incorporation Document supported by at least two partners shall have to be filed with the Registrar in a prescribed form. Contents of LLP Agreement, as may be specified, shall also be required to be filed with Registrar, online. Also, the contents of LLP Agreement or any changes made therein, if any, may be filed in Form 3 and details of partners/designated partners may be filed in Form 4 in accordance with LLP Rules, 2009.

As per provisions of the Limited Liability Partnership Act, 2008, the inadequacy of agreement relating to any matter, the liabilities and mutual rights shall be provided under the Act. Therefore, if any LLP proposes to exclude provisions/requirements of Schedule I to the Act, it will have to enter into an LLP Agreement, explicitly mentioning the excluding applicability of any or all paragraphs of Schedule I.

FEATURES OF LLP AND IT’S PERSPECTIVE

The primary function of anLLP isthe form of organizing and operating on the basis of agreements executed by the parties. It provides flexibility without imposing detailed legal requirements. The flexibility and uniqueness have helped many entrepreneurs to take benefit of its inherent positive approach. An LLP has few compliances to be followed as compared to the requirements of the Private Limited Companies in India. It is a body corporate with a separate legal entity.

It is generally considered thatLLP has become a boon as it can be formed for any type of business. Also, the Foreign Direct Investment is allowed under LLP but with the specific approval from the government.  It is recognized as the legal form in the manufacturing sector, because of which many small and medium enterprises enjoy the advantage of fewercompliances with higher access in the market.

CERTAIN SHORTCOMINGS OF LLP

LLPs have restricted access to Capital Markets as they area small form of business and cannot get its shares listed on any stock exchange through initial public offerings. With this restriction, limited liability partnerships may find it difficult to attract outside investors to buy the shares. Also, LLPs do not have the concept of equity or shareholding like a company. Most LLPs have to rely on funding from promoters and debt funding.

REASONS TO INITIATE A START-UP WITH LLP

Recently, there is a noticeable increase in the number of entrepreneurs opting an LLP for their start-ups. There are numerous reasons for such trends:

  • Low formation cost.
  • Restriction and compliances.
  • The flexibility offeredas compared to other business structures.
  • An LLP can enter into a contract and own properties.
  • It has perpetual Succession similar to the company (change in partners does not change the legal status of LLP).
  • The creditors of LLP cannot claim the personal assetsof the partners in case LLP is liable for debts.
  • There is no limit for the maximum number of partners in LLP, which increases the possibility of  more investors in the company.

Start-ups should make a decision based on their long term objectivity. In LLP, the designated partners have the right to manage the business directly, unlike companies. LLP is suitable for start-ups where the business is to be handled by afew partners who contributed for the formation of an LLP and are drawing similar salaries.

Start-ups with LLP fulfils the objective of the founder to have direct control over the business affairs of the Company.

INTRODUCTION

In India, Partnership Firms are the most favoured form of business. When two or more individuals come together for operating a business with a common intention to earn profits, they start a partnership firm. It is necessary thatminimumtwo persons come along as a single entity to form a partnership firm. The partners agree to share the profit as well as losses in the predetermined ratio or equal ratio. All Partnership firms are governed under Indian Partnership Act, 1932.

The registration of Partnership Firm should be voluntary and as per the guidelines provided under the Indian Partnership Act, 1932. However, the registration allows higher creditability along with the ease of expansion or conversion of business at a future date.

The Partnership Firm is registered with the Registrar of Firm (ROF). The registration procedure of partnership firms varies from state to state. Moreover, the timetaken for issuing a registration certificate varies.

FEATURES OF THE PARTNERSHIP FIRM

Formation of the Firm - Registration of Partnership firm is done under the Partnership Act, 1932. The partnership comes into existence when an agreement includes such terms and conditions, rules and regulation for the formation of the partnership.

Liability - The partners have to bear unlimited liability in a partnership. It means that the partners may use their assets for paying the debts and dues of the company.

Members - Minimum number of members required to start a partnership firm is 2, and the maximum number is 20, and in case of the banking industry, the maximum number is 10. According to the new Companies Act, 2013, the maximum number of members should not be more than 100 in case of a partnership.

WHY DO BUSINESS’S PREFER A PARTNERSHIP FIRM

Easy to form - Partnership firms are easy to develop as they exclude many formalities. The registration of the partnership firm is not compulsory, and it can be easily created by executing an agreement.

More capital - As the partners can be two or more to form a partnership, the funds raised can be more as compared to sole proprietorship where the amount of capital isrelatively limited.

Sharing of Risk - The risk of loss is shared by every partner as specified in the agreement so that the burden of losses doesn't come on anyone partner.

Secrecy- It is not compulsory for the Partnership firms to publish their accounts which leadto the confidentiality of its operations.

WHY A PARTNERSHIP MAY NOT BE PREFERRED

Unlimited liability - The partners of the partnership firm have unlimited liability, and it is one of the significant demerits. It means that the personal assets of the partners can be used for paying the debts of the company.

Lack of continuity - Partnership is discontinued on the death, retirement or insolvency of its partner, resulting into lack of continuity. However, the remaining partners continue the business by executing the new agreement.

Limited resources - The resources of the partnership firm are limited due to the restriction on the number of partners in the partnership firm. Due to which the partnership firms face problems in the expansion of the business.

Conflicts - The conflicts arise due to the difference in opinion that may lead to the dispute between the partners. 

PARTNERSHIP FIRMS AND THEIR TYPES

Based on two factors, the partnership is classified;

  1. Duration

Partnership at will - The partnership at will can be formed and closed as per the will of partners. It can be continued as long as the partners intend to carry on the business and can end as per the wish of partners.

Particular partnership - Some partners come together and form a partnership for a particular purpose. For, e.g., for constructing a building, the partnership is established, then it is known as a particular partnership.

  1. Liability

General partnership - In this type of partnership firm, the liability of partners is unlimited as well as joint. They have the right to take participation in management, and the actions or decisions of the partners that are binding on each other. 

Limited partnership - In this type of partnership, at least one partner has unlimited liability, whereas rest have a limited one. The partner with limited liability has no right to participate in the management. Registration of the limited liability partnership is compulsory.

REGISTRATION OF THE PARTNERSHIP

Registration of the partnership is optional, but if registered, it gives a proof of the firm’s existence. If the firm does not get registered, it is stripped of many benefits. The partners have to face the consequences for the non-registration of a partnership firm.

  1. The partner of an unregistered firm will not be able to file a suit against the firm or any partner.
  2. The suit against the third party cannot be filed.
  3. Also, the firm cannot file a case against any of the partner.

SOME DOCUMENTS THAT ARE REQUIRED FOR REGISTRATION

  1. PAN card of Partners
  2. Copy of Address Proof of Partners
  3. Declaration/ Affidavit intending to act as a partner
  4. Partnership Deed (Original) signed by all the Partners
  5. Lease or Rental Agreement of the Business Place
  6. Form No. 1 (Application for registration under Partnership Act)
  7. Utility Bill as the address proof of Business Place

HOW DO THE PROVISIONS OF A PARTNERSHIP FIRM BENEFIT A START-UP?

No need to submit an annual return.

In comparison with an LLP where one has to fulfil many compliances, your start-up will not have to file an annual return in a Partnership firm to the Ministry of Corporate Affairs.

No requirement of Statutory Audit.

Another significant advantage of a Partnership firm is that there is no requirement of Statutory Audit. A Partnership Firm is not required to get its books of account audited.

As it can be pointed out that a Partnership firm can be incorporated byminimum two people through a partnership deed and it has many benefits. If you are planning to open a startup, then you should consider a partnership firm as it has fewer legal requirements under the law as compared with the other business structures and hence, a partnership firm will benefit your start-up.  All process of partnership firm is straight forward from its incorporation to it's winding up.

INTRODUCTION

India being a country of 1.3 billion people, is termed as an emerging market for products and services sold by every corporation around the globe. The pace at which we’ve been experiencing a growth in the economy, it is so expected that India will soon be a heaven for launching new businesses. India hasa history of people doing business when the world at large was busy establishing a civil administration in their countries.

With various schemes and credit policies government is trying to push people for conducting, launching or starting a new business, which in turn will not only help government but will also create employment opportunities for public, making it a vehicle for not just economic but for the overall development of Indian societyIndia though in its later development stage realized the complication faced by Indian people for doing business, had launched various schemes to provide an aid in catalyzing the process of incorporation of business.

ELIGIBILITY FOR START-UP

  1. If a person desires to launch a new business or plans to incorporate a startup, he / she may either launch it as a Private Limited Company or Limited Liability Partnership.
  2. A company should be a new firm or a company or it should not be older than a period of ten years. Also, the turnover of the firm/ company should not exceed the limit of 100 crores.
  3. The firm should have obtained approval from the Department of Policy and Promotion (DIPP).
  4. To get approval from the Department of Policy and Promotion, a firm should be funded by the Incubation fund, Angel Fund or Private Equity Fund.
  5. The firm should have received a patron guarantee from the Indian Trademark and Patent office.
  6. It must carry a recommendation letter from incubation.
  7. Capital gain is exempted by the authorities from start-up India campaign.
  8. The firm must provide with an innovative product which satisfies the public wants, such product or services should be in the paramount interest of the people.
  9. Angel fund, Private equity fund, incubation, accelerators, etc. should be registered with SEBI (Securities Exchange Board of India).

APPLICATION PROCEDURE

  1. Log on to start-up India portal online (http://startupindia.gov.in/regitration.php)
  2. Enter the Legal Entity
  3. Enter the incorporation or registration number.
  4. Enter the incorporation date.
  5. Enter the pan number (optional).
  6. Enter the address, pin code and State.
  7. Enter the details of authorize representative.
  8. Enter the details of directors and partners
  9. Upload the essential documents and self-certification in a prescribed manner.
  10. File the incorporation certificate of the company.

GOVERNMENT SCHEMES

As read in the introduction,the Indian government has a keen interest in accelerating the growth of businesses in India. Following are few schemes launched by the government for the smooth functioning of startups or aiding the start-ups:

  1. Support for an international patent in the protection of electronic and information technology

This scheme was launched by the department of electronic and information technology as a pushback for promoting innovation; it provides the financial help in terms of MSME and technology start-ups by providing the reimbursement of 15 lakhs or 50% of expenses incurred for filing and processing the patent.

  1. Software Technology park scheme

This scheme is headed by the software technology park of India. All the software companies are eligible to receive the benefits from these schemes. This scheme has been launched with an idea to promote the export of software products from India. The benefits available are sold in DTA up to 50 % of FOB value.

  1. Electronic development fund policy

This scheme is launched by the department of electronic and information technology. The purpose stated by the department under this scheme was to develop electronic system design and manufacturing or creating net-zero import by 2020. This scheme will help Angel fund, private equity fund and Venture capital fund to invest in innovative ideas and provide seed funds towards R&D in this section. Electronic Development fund policy is a kind of fund which in turn will professionally manage the daughter fund and also provide the risk capital for the company producing new technologies.

  1. The Venture Capital Assistance Scheme

This scheme is headed by small farmer agri-business consortium. Benefits under this scheme will be provided to single farmers, producer group, self-help groups, etc.  This scheme is launched with an idea to provide financial assistance by way of an interest-free loan to the farmer community in providing the shortfall in the capital for ongoing projects.

  1. Credit Guarantee

Credit guarantee is fund scheme headed by Credit Guarantee Fund Trust for Medium Small Micro Enterprise. This scheme is launched for the benefits of Medium Micro Small Enterprise engage in manufacturing activities excluding educational institutions, self-help groups, training institutions and retail trade. This scheme was launched for the purpose of strengthening the credit flow policy and provides a well-functioned flow of the credit to MSME.

CONCLUSION

A Startup was basically an effort individuals to transform not just the country’s economy but of the world. As the change  everyone is experiencing in the economical, technological, educational and so many other fields it important to reciprocate the same from the young individuals. The world these days needs an individual with a characteristic of a manager, as a leader and also as the person who is a visionary helping the country to reach new global standards.

A Startup is a major source of creating employment in the country. After the change in government in the year 2014 a major shift in policies relating to a startup has been implemented. Such policies introduced in the market have been a sole driver to promote and propagate an idea for the incorporation a startup. The policies like Start-up India and Make in India are promoting a business ideology, it is also providingaid in the form of funding and few more schemes that helps Startups to get skilled labour, quality material, good infrastructure and all other help required for its growth.

INTRODUCTION

A country and its government have to find a harmonious construction between the growth of these business and environment. Though improvement in the rate of literacy and other conditions has led to more demands than the traditional ones, but more or less, the state should focus more on the roots of the advancement of the country. The principle of Substantial Development needs to be followed for achieving the desired results set by them. Understanding the need for such activities, the government, after a thorough discussion, have found a business model that can involve these businesses for conducting philanthropic work in society. The Ministry of Corporate Affairs, in formulating replicable rules for the current corporate scenario, has laid down rules, regulations and incentives for not for profit organization (NPO). Section 8 of Companies Act, 2013 has laid down provisions for incorporating NPOs. NPO, like every other company,is of corporate nature, having similar features but with different purposes. NPO can be formed for the purpose of education, the supply of food, shelter, clothing and other necessities for living. An entrepreneur with an urge of doing something for the society can start a business/company in the form of section 8 company (NPO).

DOCUMENTS REQUIRED FOR INCORPORATION

Following are the documents required for the process of incorporation of NPO:

  1. Pan Card - A copy of pan card should be submitted by the directors and subscribers of the company for the process of incorporation. A pan card is a document containing a unique identification number provided by the department of income tax, which eventually forms a core document for the process.
  1. IdentityProof - Every director employable in the company and subscribers of the company has to provide an identity proof to prove his Nationality. Following is the list of the documentation required as identity proof:
  1. Passport
  2. Election Card or Voter Identity Card
  3. Driving License
  4. Aadhaar Card
  1. Residential Address Proof - A residentialaddress proof is to be submitted to confirm the current address of the directors and subscribers. Following is the list of the documents to be submitted as the residential address proof:
  1. Bank Statement.
  2. Electricity Bill.
  3. Telephone Bill.
  4. Mobile Bill.
  1. Registered office proof - Along with the Pan card, identity proof and residential proof, a proof of registered office address of the company should be submitted for completion of the process of incorporation. Following are the document to be submitted as proof of the registered office of the company:
  1. Registered document of title of the premises of the registered office of the company in the name of the company.

Or

A notarized copy of rent or lease agreement of the registered office of the company along with the rent paid receipt, which should not be more than one month old.

  1. Utility Bill which can be Electricity Bill/ Telephone Bill
  2. No Objection Certificate (NOC) by the owner of the property. NOC shall be in the form of Board Resolution if the owner is a company.

REGISTRATION OF NPO

Following are various steps to be followed by every person for incorporating One Person Company:

  1. Approval of Company’s name by filing RUN form

The incorporation of Company shall be initiated by reserving its unique name with prior approval or by using SPICE form. The incorporation certificate is provided if the name of the company is acceptable by MCA. SPICE stands for Simplified Per Forma for Incorporating Company Electronically. MCA introduced RUN Form to reserve the name of incorporating companies.  The requested name would be checked by MCA personnel at Central Registration Centre against the companies, LLP and trademarks to avoid similarities. If the name is unique, it will be approved by MCA, and the applicant would be intimated via email.

A name of the entity should always be registered, but before registration director/ directors or promoter/ promoters should decide the name that is going to reflect in books/ register of ROC at the time applying for incorporation. A name should be divided between three parts 1) Name 2) Object 3) Constitution. Name of the company will be unique name decided by the promoters and directors and object will the reason/ purpose for which a company is incorporated and constitution will manifest what the company is registered for, for example, private limited, public limited, limited liability partnership, Limited Liability Company, etc. However, NPOs to be incorporated under Section 8 of Companies Act, 2013 are exempted from having a Constitution in its name.

REGISTRATION FOR SECTION 12A CERTIFICATE

Section 12A certificate (of the IT act) is especially for section 8 companies and other NGOs, this certificate helps them to claim tax exemption on any surplus revenue earned by them. Income tax exemption is available for all NGO’s and trusts.

Benefits of Section 12A registrations

  1. The funds received by the trust and NGO will be nothing but expenses of trusts and NGO for the purposes mentioned in its MOA/AOA.
  2. The income received will be free from taxation.
  3. The person who is registered under section 12A will be allowed to set aside 15% income received, for the purpose of charity and other religious purposes.
  4. The accumulation of income as per sec11(2) will not be allowed in total income.
  5. The Finance Act, 2014 extends such other benefits for the registration of the trusts and NGO under section 12AA.
  6. The registration under section 12A is the one-time registration which will remain active till the point of voluntary or compulsory cancellation.

Only NGOs, Charitable trust, Religious Trust and Societies are allowed to register under Section 12A. No other entity is allowed to register.

DOCUMENTS REQUIRED FOR 12A REGISTRATION.

Following are the documents required for the eligible entities for registration under section 12A:

  1. Certified copy of instrument pursuant to which the entity or organization was established or created.
  2. Certificate of incorporation.
  3. Certified copy of instrument evidencing the formation of trust, society, NGO or any entity that is eligible for such benefit.
  4. Certified copy of the annual report of trust, societies, NGO and other eligible entity.
  5. Note on activities.
  6. Certified copy of the approval of grant under section 12A and 12AA.

CONCLUSION

What makes an organization anNPO has to do with ownership, purpose and public support. Hence from the above points, it can bestated that Section 8 company is a reliable source to establish an NPO because it is centrally recognized.

INTRODUCTION

An introduction of Companies Act, 2013, with its formulation and implementation, has brought with many new forms of business. Generally,there are five types of company’s, i.e. public limited, private limited, limited liability partnership, not for profit companies and One Person Company. Section 2(62) of Companies Act, 2013 defines One Person Company as any company limited with liability, having the same features of limited liability company with an advantage of a sole proprietorship. Furthermore, members of the company are the subscribers to the Memorandum of Association of the company. So, in a nutshell, as the name suggests, OPC has only one person as its member. Generally, promoters or any person willing to incorporate his/her business considers establishing OPC in the primitive stage of entering, entrepreneurial world.

FEATURES OF ONE PERSON COMPANY 

  1. Private Company: - Any person of Indian Nationality willing to incorporate his/her company under the head of OPC will have to incorporate such a company as a private company.
  2. Sole Ownership: - Unlike private companies where the director run the business and promoters own the company, in OPC, the promoter of the company and person running the company is the same. A person subscribing to the MOA of the company can  also be the director of the company.
  3. Nominee: - A person willing to incorporate the company as OPC has to provide the name of the nominee at the time of registering the company.
  4. No minimum paid-up capital: - There is no pre-requisite capital amounted mentioned as per the provision of the companies act.
  5. Special Privileges: - As per the special provisions mentioned by the Companies Act, 2013,  OPCis allowed certain exemptions in terms of compliance.

PRIVILEGES OF ONE PERSON COMPANY

Following are the privileges enjoyed by an OPC:

  1. OPC’s are exempted from the holding an Annual general meeting.

An Annual General Meeting is meeting held by public and private companies comprise of shareholders and other stakeholders to discussed significant matters to companies.

  1. There is no need for OPC’s to annex their cash flow statements at the time of publishing the financial statements.
  2. No Company Secretary is required to sign the financial statements of the OPC; a director can also do the same on behalf of the company.
  3. No provision relating to Independent Directors have to be complied with, in the case of an OPC.
  4. Many provisions that stand a base for conducting a meeting in case of a public and private company does not apply to OPC.
  5. Sec 197 and sec.198 regarding the remuneration of director, is exemptedin case of OPC.

REGISTRATION OF ONE PERSON COMPANY

Following are various steps to be followed by every person for incorporating a One Person Company:

  1. Approval of Company’s name by filing RUN form

The incorporation of Company shall be initiated by reserving its unique name with prior approval or by using the SPICE form. The incorporation certificate is provided if the name of the company is acceptable by MCA. SPICE stands for Simplified Per Forma for Incorporating Company Electronically.

MCA introduced RUN Form to reserve the name of incorporating companies. The requested name would be checked by MCA personnel at Central Registration Centre against the companies, LLP and trademarks to avoid similarities. If the name is unique, it will be approved by MCA and the applicant would, via email.

A name of the entity should always be registered, but before registration director/ directors or promoter/ promoters should decide the name that is going to reflect in books/ register of ROC at the time applying for incorporation. A name should be divided between three parts 1) Name 2) Object 3) Constitution. Name of the company will be unique name decided by the promoters and directors and object will the reason/ purpose for which a company is incorporated and constitution will manifest what the company is registered for, for example, private limited, public limited, limited liability partnership, Limited Liability Company, etc.

  1. Form of Incorporation
  1. SPICE:

Application for Incorporation of OPC needs to be made in Form SPICE. It is mandatory to have a Director Identification Number by the director of the Company, which is commonly known as DIN.If a person is already Director in any company, then he can incorporate OPC with his existing valid DIN. A person, who is willing to incorporate a new company not having DIN, shall apply for the same in Form SPICE, where details of directors must be filled along with PAN or Passport details.

  1. Consent by Nominee:

Nominee who is willing to be appointed, is required to give his consent on Form INC-3. The form shall be downloaded from MCA portal once the name is approved and shall be physically signed by Nominee.

  1. No Incorporation Fee

The MCA in an effort to simplify the process of registration of Company and encourage the Start-ups has announced zero fees for the incorporation of Companies. However, stamp duty to be paid in the state of Incorporation and for application of PAN, TAN shall be applied.

  1. MOA and AOA

MOA is the document containing all fundamental information required for the incorporation of the company. It is a document which is considered as the draft prepared by the company validated by law for its functioning in successful form. Some important clauses to be included in MOA are the name clause,clause mentioning the registered office of the company, object clause, liability clause, capital Clause, etc. MOA is a mandatory document to be filed with ROC (Registrar of Companies) at the time of Incorporation.

AOA is the draft which includes the rules and regulations to be followed by the Company; it also contains the layout of internal management of the Company. AOA includes the allocation of shares, Intellectual property rights, division of profits, alteration of capital, the procedure to hold general meetings, borrowing powers, dissolution of the company, etc.

Both MOA and AOA needs to be prepared as per the provisions of Companies Act, 2013.

  1. Incorporation Certificate

After MCA approves the Incorporation Form, MOA and AOA of the company, the company gets the Incorporation Certificate, including the date of incorporation, PAN number and TAN number of the Company.

NOMINEE TO ONE PERSON COMPANY

Any person incorporating a one person Company has appointed a nominee at the time of registering the company under Companies Act, 2013. Such a person has to be complying with the basic requirement for entering into a contract for being a nominee of the OPC or to be appointed as a nominee of OPC by the promoter of the OPC.

  1. Nominee of One Person Company: - At the time of incorporating a One Person Company,a person has to appoint a nominee, such person must file the consent of the nominee in the prescribed form as per MCA. In case of the death of the promoter, the nominee will by law take the place of the promoter.
  1. A person not willing to continue to act as the nominee of the OPC willhave to submit his dissent within the period of 15 days to the single member of OPC after the time of his proposal.
  1. The single-member shall appoint another person as nominee within 30 days of receipt of the notice of withdrawal of consent.

DOCUMENTS REQUIRED FOR INCORPORATION

Following are the documents required for the process of incorporation of One Person Company:

Directors / Subscriber / Nominee who are Indian nationals accepting the proposal for being a director / subscriber in the company should have the following document as a prerequisite condition for employment in the company:

  1. Pan Card - A copy of pan card is mandatory to be submitted by the director / subscriber / nominee of the company for the process of incorporation. A pan card is a document containing a unique identification number provided by the department of income tax, which eventually forms a core document for the process.
  1. Identity Proof - Every director / subscriber / nomineeemployable in the company shallprovide an identity proof that will form a part in proving the Indian Nationality of such director. Following is the list of the documentation required as identityproof:
  1. Passport
  2. Election Card or Voter Identity Card
  3. Driving License
  4. Aadhaar Card
  1. Residential Address Proof - Every director / subscriber / nomineeemployable in the company shall provide an address proof that will form a part in proving the residential address of such director. Following is the list of the documentation required as residential address proof:
  1. Bank Statement
  2. Electricity Bill
  3. Telephone Bill
  4. Mobile Bill
  1. Registered office proof - Along with the Pan card,identityproof and residential proof, a proof of registered office address of the company should be submitted for completion of the process of incorporation. Following are the document to be submitted as proof of the registered office of the company:
  1. Registered document of title of the premises of the registered office of the company in the name of the company.

Or

A notarized copy of rent or lease agreement of the registered office of the company along with the rent paid receipt, which should not be more than one month old.

  1. Utility Bill which can be Electricity Bill/ Telephone Bill
  2. No Objection Certificate (NOC) by the owner of the property. NOC shall be in the form of Board Resolution if the owner is a company.

MANDATORY COMPLIANCE FOR ONE PERSON COMPANY

Following are the mandatory compliances for One Person Company:

  1. Name Board: Every person incorporating One Person Company should after the process of registration affix a board consisting of Name of the company with an appropriate title to the company and registered office of the company.
  2. Company Rubber stamp:  For the purpose of executing the documents or entering into a legal agreement, a rubber stamp is mandatory.
  3. Opening of OPC Bank Account:  A person willing to incorporate an OPC has to open bank account following are the document required for opening of the bank account:
  1. Self-attested copy of OPC incorporation.
  2. MoA of OPC.
  3. AoA of OPC.
  4. Resolution to open a bank account of the company.
  5. Copy of Pan Allotment letter.
  6. Copy of telephone bill.
  7. Identify proof of director.
  1. Appointment of Auditor: A director of the OPC should appoint an auditor of the company for the financial year.

CONCLUSION

OPC is one of the significant changes of the Companies Act, 2013,that was introduced to encourage self-employment with a backbone of India's legal system.Hence, if you are looking to limit your personal liability, you can consider registering an OPC. It is easier to get loans, and there is more transparency in the company.

Late fees for every day delay is Rs 25/- each (CGST = 25/- , SGST = 25/-)

INTRODUCTION

The Goods and Service Tax (GST) came into effect from July 2017 after many years of VAT (Value Added Tax). It comprehends 17 different taxes levied by the Central and State Government. The concept of one nation one tax system aims to improve competitiveness in the global market. GST has abolished certain taxes and clubbed others under one umbrella of its identity.  GST leads to reduce the cost of doing business; it also minimizes the taxes. The implementation of GST got overwhelming support from various entities. One of the benefits of GST was that no taxpayer will be required to pay taxes on advances received for supply of goods.

GST is the biggest tax reform in India as it is improving the process of doing business in our country and increasing the base of taxpayers by bringing small business in its ambit. Under the regime of GST, the entities involved in buying and selling of goods and services both are required to register. Entities without the registration of GST are not allowed to collect GST from the customer or claim an input tax credit of GST paid and hence could be penalized under applicable laws.

PERSON LIABLE FOR REGISTRATION

Every business in India whose annual turnover is or above Rs. 20 lacsfor services and Rs 40 lacs for goods is liable for registration of GST.

Following are persons liable for registration:

  1. Any person who is liable to register under the previous indirect tax laws will have to register for GST.
  2. Any business that was registered under the GST Act previously but later was merged or demerged or transferred to someone, such transferee should also be liable to register with GST.
  3. Any person who is involved in interstate trading of goods.
  4. Casual taxable person.
  5. A non-resident person who is liable to pay the tax.
  6. Any person who is a supplier, his/her agent should be registered.
  7. Any person who pays tax under the reverse charge mechanism.
  8. Any Input Service Distributor.

PROCEDURE FOR GST REGISTRATION

Following are the points to be followed for the registering GST under the Act.

  1. Go to GST protocol or GST official website.
  1. Generate a TRN by completing OTP Validation.

(TRN basically stands for Track Application Registration Number that is provided by GSTN as an acknowledgement after any applicant has successfully submitted his documents at thetime for registration.)

  1. OTP verification and TRN Generation.

(After successfully providing the information required, the system will generate OTP, such OTP will be sent to the applicant via his/her mobile number or email address if any.)

  1. TRN Generated.

(After successful submission of applicant’s OTP in the required column, TRN is generated.)

  1. Any applicant can then login into GST portal by use of TRN generated for the process of Registration.
  1. Submit Business Information.

This step is associated with submitting or filling every required detail for completing the process towards GST Registration. Such information includes the company’s name or the constitution of the company and other mentioned details.

  1. Submission of promoter’s Information

After proper submission of the company’s information, the promoter’s particular should be submitted in detail in the required column. Such details include the Pan Card, Aadhar Card, etc.

  1. Submission of Authorized Signatory Information

An authorized signatory is a person authorized by the company to file and submit the required information for the process of registration of GST. The said person is also responsible for maintaining the compliance of GST.

  1. Principal place of Business.

A principal place of business is a registered office of any company located in the area of business. A person is to submit the details of such principal of business withthe process of registration under the Act.

  1. Additional Places of Business:

As the principal place is like the head office of the company or business, an authorized person also have to provide details about any other place from where the business is carried out.

CANCELLATION OF GST REGISTRATION

In the process of cancellation of GST registration, a person will debar from or will not be allowed to pay or collect the GST. Once the person is not allowed under the law or due to any happening of an event which results in taking away the right of collecting or paying a GST, he /she will be debarred. Additionally, if any company under the law has to mandatorily register under the GST Act, if such company fails to comply with GST registration resulting in its cancellation may have to pay the penalty until its subsistence. Cancellation of GST can be made either by the taxpayer himself or by his/her legal heir or the due happening of any event contrary to GST regulation by Tax Officer. 

REASONS FOR CANCELLATION OF REGISTRATION BY TAXPAYER

  1. The business is discontinued.
  2. By any reason of merger, demerger, amalgamation, compromise or any arrangement pursuant to which the original company is discontinued.
  3. If the form of the company is changed from private to public.

FORMS OF REGISTRATION

  1. Any person willing to cancel the registration of GST should by himself submit the request to authorities through form GST-REG16.
  2. Such registration will only be cancelled if any authority approves such form and issue the cancellation order in form GST-REG19. The tax officer will notify the date from such registration stand cancelled.

CANCELLATION BY TAX OFFICER

  1. If the principal place of business becomes defunct or is of no use.
  2. Issues invoices or provide services or sells any goods in violation of the provision.
  3. Does anything that is in violation of anti-profiteering provisions.

Serial Number

Rate of taxation

Items on which rate of tax is applicable

1.

5%

Frozen Vegetables and Fruits, Rice and branded flour, Handmade safety matches, etc.

Below Rs. 500.

2.

12%

Butter and Cheese, Mobile Phones and Ayurvedic products

3.

18%

Beedi Wrapper Leaves, Biscuits, Footwear is exceeding Rs. 500.

4.

28%

AC, Cars, Tobacco Products , etc.

Goods and Service Tax Forms

Purpose for which form is issued

GSTR 9

All Entities who are registered under the Act have to file an annual return in GSTR9.

GSTR 9A

GST registered user who has opted for composition scheme are required file GSTR 9A.

GSTR 9C

GSTR 9C is basically a form in the form of a statement, which is basically a reconciliation between the figures mentioned in GSTR 9 and figures in audited financial statements of a taxpayer.

Name of the Act

Late fees for every day of delay

Central Goods and Services Act, 2017

Rs 100*

Respective State Goods and Services Act, 2017 (or) Union territory Goods and Services Act, 2017

Rs 100*

Total Late fees to be paid

Rs 200*

The law has fixed maximum late fees of Rs 5,000. This means that in any case, the maximum late fees that can be charged by the Government are Rs 5,000 each return being filed under each Act.

Serial Number

Act on which Penalty can be charged

Rate of Penalty.

1.

If any person is intentionally trying to evade taxes or by any act pay less tax than determined

100% of the tax evaded or deficiency of tax paid but subject to minimum of Rs. 10,000.

2.

When any act done by any person where such person proved it was an unintentional violation

10% of tax amount involved.

Or minimum of 10,000.

3.

When such a person is not a taxable person and does act in contrary to violation of the provisions of the Act

Shall be liable to pay a penalty of Rs. 25,000.

4.

If the amount involved in Fraud is up to 50 lacs

Imprisonment for a period of 1 year along with penalty to be determined by the authority.

5.

When the amount of fraud ranges between 50 lacs to 100 lacs

Imprisonment for a period of 3 years along with penalty to be determined by the authority.

6.

When the amounts of fraud exceed 100 lacs

Imprisonment for a period of 5 years along with penalty to be determined by the authority.

CONCLUSION

Introduction to a new tax regime was a bold shift introducing the system of one government one tax for all the activities relating to goods and services. After the launch of GST, an economist has claimed that this step could play an important role in changing not just our economy but will help to play a significant role in the world economy. This tax had taken a step to remove the cascading effect, i.e. the payment of tax at every stage of the process till it’s sold to the end consumer.

The GST system providesaneasy way of administration that helped to remove the complications relating to the provisions of payment and receipt of taxes at multiple levels at central and state level. This helped the government to provide a better service coupled with increased compliance. It also helped the government to generate higher revenue, way reducing the cost of collecting taxes at multiple levels. It also adds to transparency in indirect tax structure as it is a uniform tax structure.

A voluntary organization of people working together for achieving the desired result is known as Company. Due to the increase in corporatization in the country and the introduction of globalization, it is possible for one entity to expand beyond the borders of the countries around the globe. Such expansions by the corporate are done by the process of Mergers & Acquisition (M&A). There are various laws introduced by the government on this behalf for the smooth functioning of the process of merger & acquisition. Laws governing the process of Merger& Acquisition are Companies Act, 2013, Competition Act, 2002, Foreign Exchange Management Act, 1999, Substantial Acquisition and Share Takeover Regulation, 2011, Income Tax Act, 1961 and other laws stated by the legislation. This activity will strengthen the roots of the business and help a corporate either by combining the resources or by absorbing the resources of any firm.

CONCEPT

A Merger& Acquisition means a process of supplementing the resources of the company either by combining or by absorbing the resources of another company. Merger is the dissolution of two companies into forming as one single unit of a company that will be the product of the combination of two companies. The merger requires no cash to carry out the process; rather,it requires two companies to dilute their power.Acquisition, on the other hand, is a process of absorbing the business of another entity by way of paying consideration calculated as methods given by law.The acquisition can also be called as takeovers.

REASONS

There are various reasons for which a merger & acquisitions are conducted by the corporate;

  1. Growth: - Any company that either wants to grow in any different market or want an expansion in the market would go for merger & acquisition.
  2. Customer base: - Growth in customer base helpsthe company to achieve a better position than its competitor, helping the company to procure better profits for future survival.
  3. Technology: - Merger & Acquisition helps companies to combine resources which in turn will help the company to add significantly advance technology in its valuation.
  4. Economies of Scale: - Mergers & Acquisition will eventually lead to consolidation of the competitors' resources helping the company to take advantage of economies of another company.
  5. Leverage: - This activity may leverage your balance sheet or make it more strongas compared to the previous one.
  6. Expand Talent: - M&A will help to acquire talent or to combinethe talent of two companies helping corporate to upgrade the company’s position.
  7. Strong Position: - To control the market and maintain the stability of the firm, it is essential to takeover or to combine the business of the competitor.

PROCEDURE

  1. Determine the market opportunities

Any company intending to merge or acquire any other company should make a proper analysis as to whether such a market will provide them with an advantage or help the company for expansion in the new market.

For Example:

ICICI bank acquiring the Bank of Rajasthan in turn helped the former to expand its presence in the Northern and Western region. Such acquisition was a combination of the branch franchise of Bank of Rajasthan and strong capital base of ICICI bank.

  1. Identifying the Business for expansion

Any company carrying out one business want to expand their activitycan also plan for Merger and Acquisition for the purpose of buying the business of other company with an intention to add one more section in their business

  1. Assessing the Financial Position

Any company wanting to merge with another, should always assess the financial position of the company providing the finance for the transaction and should also take into consideration the benefits arrived after such transaction is completed. Companies should also compare the target companies with any other targeted opportunities.

  1. Assessing the Benefits and Drawbacks

Every company intending for Mergers & Acquisition should always analyze the benefits it intends to receive or drawbacks a purchaser may suffer. Due to such transactions, it is highly crucial for the company to take an informed decision to carry forward the process of Merger& Acquisition.

For Example

After Satyam Computers scam, the company nearly came to liquidation with no future of revival. Mahindra decided to take over the company, where Mahindra as purchaser made a comprehensive analysis of drawbacks and benefits they will receive or suffer and after thorough analysis decides to take over Satyam.  

  1. Valuation Process

A purchaser intending for Merger and Acquisition should conduct a thorough valuation of the targeted company on the basis of three methods:

  1. Discounted Cash Flow Analysis.
  2. Comparable Transactional Analysis.
  3. Comparable Publicly Traded Company Analysis.

The above methods help a purchaser to make a thorough evaluation of the price of the targeted company.

For Example

In the deal of RCOM and GTL in 2010, it seemed that the RCOM would be the dominant driver as it seemed that RCOM was the larger company but after conducting the valuation it was concluded that the swap and cash ratio didn’t work in their favour. So it is always better to evaluate the company’s position along with the net value and should not estimate on the basis of guesswork or without any solid proof.

  1. Payment of Purchase Consideration and Due Diligence

Once the purchaser/ acquirer had decided the price on the basis of the methods mentioned as per the law, he/she should decide the payment structure and layers and should make the payment. Due Diligence should be carried out by the acquirer of the target company in a way to provides accurate information that will be beneficial for the acquirer.

  1. Complete Transaction and Monitor the Arrangement

Any successful merger will always lead to complications until it is fully brought to an end by the managers processing the Mergers &Acquisition. It is very crucial to monitor the process until the end to be able to maintain its smooth functioning and be able to resolve any issues that arise in the middle of the Merger and Acquisition process.

EXAMPLE OF DIFFERENT M & A

  1. Disney merged with Pixar for smooth functioning process and for easy collaboration.
  1. Google acquired Android for 50million dollars in August 2005.
  1. Tata acquired Jaguar& Land Rover for entering into the luxury market.
  1. Vodafone and Idea merged for providing a better communications service and increase the customer base for the capital base of both the companies.

M&A’s are considered as critical game-changers and prove to be an importantcomponent of any business strategy. The known fact is that the rate at which our economy is evolving, only the most innovative can survive. That is why, an M&A can be considered as an important strategic call for a business to opt for.

M&A’s are a two-way win, a business with a good management system and a process system will be useful to a buyer who wants to improve their own. Ideally, the business you choose should have systems that complement your own and that will adapt to running a larger business with the insights of both the companies.

INTRODUCTION

This year, Brazil has elected the first market-driven president since the military regime, for keeping the promises to open up the Brazilian economy of investment and make the nation more ‘business-friendly‘.

According to strategists, the abundant global liquidity practised by banks around the world, coupled with a constructive economic agenda in Brazil, will create the best possible investment scenario, as Brazil will enjoy a period of exceptionally low-interest rates.

That is why the Brazilian economic market and digital commerce are even more ideal for international companies than they’ve been in the past.

In 2019, major companies like Novelis, Amazon and FIS are choosing to invest in Brazil. The reasons for investing in this country are numerous; some are based on the traditional advantages Brazil held and other ideas include new practices and enticements.

Another critical factor is that the Pension Reform creates a much more stable investment scenario than those in Argentina and Mexico.

Therefore, investing in Brazil now allows corporations to take advantage of a growing economy that willhighly benefit a company in the near future.

The Company interested in hiring foreign labour, whether permanent or temporary, must apply for a work permit from the General Coordination of Immigration, an agency of the Ministry of Labor and Employment. The Coordination is responsible for analyzing the request within a period of up to 45 days and depending on the merits of the application, may grant or reject the request.

The foreigner will have a period of ninety (90) days from his / her entry into the country, to prove the General Immigration Coordination his / her registration with the PIS / PASEP and the CPF / MF, as well as with the Class Organ, when dealing with regulated activity and subject to the professional supervision.This phase must be done in advance so that the process can be seen in a timely manner. To this end, the application will be by completing the “Work Permit Application Form”, signed and forwarded by its legal representative, or attorney, accompanied by the following documents as mentioned in the course of this research.

To offer a seamless process of international business Brazil has several treaties with different countries, i.e. in promoting the ease of doing business, Brazil holds double tax agreements (DTAs) with several countries. A double taxation Avoidance Agreement is a treaty entered between two countries for reducing the burden of paying double tax on the same income. It generally takes place between two countries where a person is earning income in one country and repatriating it in some other country. To avoid the confusion between the two countries on who will be the actual assessor of the person’s income this treaty is formulated. Due to Globalization business houses are going for expansion beyond the borders, it plays a significant role in deciding the net profit and net tax payable. Below is the list of countries that are a signatory with Brazil.

http://taxsummaries.pwc.com/ID/Brazil-Individual-Foreign-tax-relief-and-tax-treaties

INVESTMENT LAWS

Brazil offers an attractive destination for foreign investment. Brazil has very basic, sound legislation on FDI, which has been in force for over five decades. Brazilian law does not make a distinction between foreign and national investments. However, all foreign investors must appoint a representative in Brazil who, jointly with the representative of the company receiving the foreign investment, will be responsible for registering the operation with the Central Bank of Brazil's Foreign Direct Investment module (RDE-IED) in accordance with instructions laid out in www.bcb.gov.br.

 Registering foreign capital that enters Brazil is done electronically, using the Electronic Declaration Register on the Central Bank Information System.

Foreign investments are not subject to prior examination or verification by the Central Bank, except in specific economic sectors.

APPLICANT

a) Legal act governing the legal entity duly registered with the competent body or identity, in the case of an individual;

b) Act of election or appointment of its legal representative duly registered with the competent body;

c) Copy of the card of the National Register of Legal Entities - CNPJ, or the card of the Register of Individuals - CPF;

d) Power of attorney when the applicant is represented by proxy;

e) Original proof of payment of the individual immigration fee;

f) Other documents provided for Resolutions of the National Immigration Council.

CANDIDATE

a) Copy of the passport page containing the foreigner's number, name, date of birth, nationality and photograph;

b) Other documents provided by Resolutions of the National Immigration Council.

Employment contract:

The documents will be presented, if possible, in digital media, by the World Wide Web, provided that the guarantees of security of their authenticity are preserved, according to the Law.

The documents provided for in this article, once presented and digitized, will compose the applicant's electronic register with the General Immigration Coordination and their submission in subsequent new requests is not necessary, except in case of updating.

The notarization will not be required, except as provided by the law.

Note: This visa is withdrawn by the foreign worker still in his home country, at the diplomatic representation, where it is possible to make demands for more documents, besides those already presented by the company to the MTE.

Rights:

When working in the country, foreigners enjoy the existing rights under Brazilian law. Under the Constitution, foreign employees will have the same rights as Brazilians, and may even file a labour claim in relation to the period they worked in the country.

Visa:

The permanent visa is given to those who are legal representatives of the company in the country, as stated in the articles of incorporation or who will occupy an administrative position. The company must receive a foreign investment of at least R$ 600 thousand reais for each foreigner that wants to bring or R$ 150 thousand reais (per professional).

For foreigners, one of the most beneficial opportunities is the ‘Brazilian Investor Visa Program’. It allows anyone who is in a partnership with a Brazilian company, as well as anyone interested in investing in a real estate business, internet-based business, or interested in purchasing a government bond, the opportunity to gain permanent residence in Brazil.

TYPES OF ENTITIES

A. Limited Liability Company (“Limitada” / “Ltda.”)

To conduct commercial activities, Brazil has more than one form of the legal entity along with many other Latin American Countries. The most common legal entity structure in Brazil is the Sociedade LTDA. The Sociedade Limitada in Brazil has many features like Limited Liability Company in the U.S. or the UK. It is a legally separate entity and requires a minimum of two shareholders and has no minimum capital investment. It also allows for 100% foreign ownership. 

B. Limited Liability Corporation – S/A (“Sociedade Anônima” / “S.A.”)

Limited Liability Corporations in Brazil are regulated by a specific law (“Lei das SAs”). Those Limited Liability Corporations are considered as the closest form to US subchapter C corps. The Corporations can issue two different classes of shares,namely voting and non-voting. The liability of shareholders’ is to make payment of the shares to which the shareholders have subscribed. It is important to note that the foreign shareholders need a legal representative of the company in Brazil. Limited Liability Corporation is the ideal type of entity for larger companies who are looking to raise funds from the public.

C. SCP- Silent Partnership

When two or more members take part in business, trade, financial operations and divide profits as an unincorporated organization are known as Silent partnerships. These types of partnerships are mostly used in reforestation projects, real estate and hotel pooling.Also, this type of legal structure has a specific aim defined that the company will last only until the object of operations has been reached.

D. Consortium

A consortium means the gathering of corporations of the other companies with the aim of performing a determined activity or operation. They are unincorporated entities, where two or more members take part in business, trade, financial operations or ventures, and share profits.

E. Single Holder Limited Liability Entity (” Empresa Individual de Responsabilidade Limitada” / “EIRELI”)

EIRELIs is the most commonly used legal entity by individual entrepreneurs. The paid-in capital should be of minimum 100 times than the current minimum wage. The responsibilities of each shareholderare limited to the amount of his or her shares. However, it should be noted that all shareholders are liable for the payment of the corporate capital. Only individuals can be a shareholder and each individual can incorporate only one EIRELI. However, only Brazilians or foreigners with a permanent residency are authorized to create an EIRELI.

F. Branch Office of a Foreign Corporation

It is difficult to establish a branch office in Brazil as it takes about 6 months and the legal structures are high in cost. In order to be established, the company needs to operate under the same name as the company had in its origin country and must have a fully responsible company legal representative. For this, the company must prove its legal existence; submit various copies of articles of incorporation, latest balance sheet copy, list of shareholders and a copy of the resolution to open a branch office in Brazil. It is essential to allocate a certain amount of capital to the branch.

G. Incorporating a Brazilian Company

To expand the operations and access the Brazilian markets shall be done through the incorporation of a local Brazilian company.

Registration process for incorporating an Entity in Brazil

  1. For any person willing to set up a business entity should register with Board of Trade or Corporate Registry Office.

Any person interested in entering into a formal contract for establishing his/her business needs to submit common documents i.e. personal documents of each partner in partnership and in case of company a person needs to submit Articles of Incorporation clearly stating the interest of parties; company objectives and detail structure of corporate. For any documents to be valid should be verified by a lawyer.

MSME are exempt from this requirement.

  1. Following are the documents required for Incorporation of establishments:
  1. Articles of Incorporation or Individual Entrepreneur Application or Bylaws in three copies.
  2. Certified copy of the Identity Card (RG) and Taxpayer ID (CPF) of the owner or partners.
  3. Standard Application in one copy.
  4.  National Registration form in model 1 and 2 in one copy.
  5. Payment of fees through a bank slip.

Once a company registered after due process as required then such company receives a stamp or sticker provided by the Board of Trade or the notary, containing a unique identification number that is established in the incorporation of the Act. The owner of the company will receive in NIRE.            

  1. After a person receives NIRE he /she is eligible to get the National Register of Legal Entities, which identifies the company as a tax payer to the federal government. This registration can be done by any person online from the website of Federal Revenue Reserve.
  1. A person after the above process has to go to city town hall or Regional Administration for business licenses. This process is done at City Town Hall or Municipal Secretariat or Regional Administration. Following are the documents required for the process:
  1. City Hall Form.
  2. Approval of the address, through prior consultation.
  3. Copy of the CNPJ
  4. Copy of Articles of Incorporation.
  5. Survey Reports by Inspection agencies.
  1. The State Registration must be done at the office of State Financial Secretariat. Many of the firms have their agreement with Federal Reserve Service which allows the State Registration to obtain together with CNPJ. Any person incorporating a company has to mandatorily register the company with State Secretariat. The State Registration is necessary to register at ICMS. Following are the documents required for registration:
  1. Single Registration Document in triplicate form.
  2. Supporting Registration Document in one form.
  3. Proof of Address of partner, certified copy of original document.
  4. Certifying copy of rental agreement or any other instruments that gives a person a right to use the property.
  5. Tax registration number of an accountant.
  6.  Proof of registration under the ISS for service providers.
  7. For any entity which has been registered for the period of more than 3 months requires a Simplified Certificate by Board of Trustee.
  8. A copy of Incorporation Act.
  9. Copy of the CNPJ.
  10. Copy of Business License.
  11. RG and CPF of Partners.
  1. Any company complying the above procedure can start their operation in the country but two pre-requisite conditions should mandatorily followed by any company or partnership.
  1. A company has to register with social security within the stated period of 30 days from the registration.
  2. A promoter or partner have to be registered or should have authorization of the local government for printing of invoices and authentication of tax books.

http://www.brazil.gov.br/trade-and-invest/doing-business/basic-information-to-know-before-starting-a-business-in-brazil/starting-a-business

INTELLECTUAL PROPERTY RIGHTS IN BRAZIL

An intangible asset that is the result of creativity results in forming of Intangible asset. An intellectual property right is right of a person on his/her creativity, and it is important for a person to protect such property from being copied/ plagiarized.

Following are the protection allowed by Brazil authorities in case of Intellectual Property:

  1. Patents

A patent is a right granted to the owner of an invention that prevents others from making, using, importing or selling the invention without his permission. In Brazil, a person can make an application for right of priority only when the country in which such person resides is signatory to a treaty with Brazil or is a member of International Organization of which Brazil is also a member. The period for making application as per Paris Convention is period of 1 year and if the invention is of utility the period is 6 months. Patent protection provided up to the period of 20 years and if the invention is utility model the period of patent is 15 years from the date of filing of their respective application.

  1. Copyrights

Copyright is the right given to the owner of an original work. This right can subsist in literary works such as books and computer software, musical works, dramatic works, artistic works, sound recordings, films, broadcasts, cable programmers and the typographical arrangement of published editions of literary, dramatic or musical works, as well as artists’ performances. General protection of 70 years is provided for the work, after the death of the author or on the date of the first publication of work.

  1. Trademark

A trademark is a sign that distinguishes the goods and services of one trader from those of others. Typically a trademark can be words (including personal names), indications, designs, letters, characters, numerals, figurative elements, colors, sounds, smells, the shape of the goods or their packaging or any combination of these. A sign must be capable of being represented graphically in order for it to be registered as a trademark. A trademark lasts indefinitely so long as you register it every 10 years and it’s eligible for a renewal of 10 years after payment of fees on the expiry of the primary period. In Brazil, a person can make an application for right of priority only when the country in which such person resides is a signatory to a treaty with Brazil or is a member of International Organization of which Brazil is also a member. The period for making application as per the Paris Convention is a period of 6 months.

  1. Design

A design refers to the features of a shape, configuration, colors, pattern or ornament applied to any article or non-physical product that gives the article or non-physical product its appearance. It protects the external appearance of the article or non-physical product. The Industrial Design provides protection for 2D and 3D objects.  The Industrial Design protection will be available for a period of 10 years and additional protection will be paid for a period of 5 years in 3 succeeding slots after the period of 3 years subject to payment of the fees to be paid for renewal.  

  1. Geographical indication

A geographical indication (GI) refers to an indication used in trade to identify a product as originating from a particular territory which has given the product its special quality or reputation. The Geographical Indication is provided by the federal authority for only those who are actually established in geographical area.  

http://www.inpi.gov.br/english

Brazil is a part of several international treaties to accommodate international IP filings.

Conventions

Signatory

World Intellectual Property.

?

Berne Conventions

?

PCT

?

Paris Conventions

?

Madrid System

?

Doha

?

Universal Copyright Convention

?

Nice Agreements(International Classification of Goods& services)

?

Geneva Convention (phonograms)

?

First to use or First to File

First to File

* First to file: Applicants that are first to apply for registration of their marks are assigned trademark rights and priority, irrespective of whether the Applicants have used the marks in commerce or whether the marks were used in commerce first by others. 

Taxation policy of Brazil

Corporate tax

Also known as Imposto de Renda sobre Pessoa Jurídica (IRPJ).

Any person resident or non-resident having any business or conducting any business activities in Brazil will be covered under Brazilian taxation system. Such person conducting his/her business will be taxed on his/her operating income authorized by law.

Any promoter or director of any company established in Brazil can opt to be taxed under either of the method:

  1. Actual Income

Actual income method is where calculation of tax payable is done on the actual income received.

  1. Presumed Income

Presumed income is amethod where as per the provisions of law a deemed amount is calculated on which tax is applicable.The deemed taxable income system (Lucro Presumido) is an optional tax regime for companies whose gross revenue in the previous year was less than BRL 78 million and is calculated on a quarterly basis. The IRPJ and the CSLL are levied on deemed profits, which are determined by applying a specific percentage to the revenue of each quarter, plus other income and capital gains earned.

Any small or medium enterprise that has a gross income of less than 4.2 million BRL can opt to be taxed under simplified tax regime.

Rate of Taxation

A normal corporate income tax is estimated to 15%.The combined taxable rate of taxation is 34%. (Combined tax rate includes Sur Tax of 10 % and Social Contribution of 9% which is subject to change)

Capital Gains Taxation

There is no separate treatment for tax under capital gains. Capital gains are treated the same way as ordinary income (subject to restrictions on the offsetting of capital losses against ordinary profits in certain cases), i.e. any business entity earning the profits or any income as capital gains will be taxed in usual way of income tax.

Capital gains derived by a non-resident on an investment registered with the central bank are subject to progressive rates, as follows:

  • 15% until BRL 5 million;
  • 17.5% from BRL 5 million to BRL 10 million;
  • 20% from BRL 10 million to BRL 30 million;
  • 22.5% over BRL 30 million
  • 25% rate applies if the gains are derived by a resident of a tax haven (A tax haven is generally an offshore country that offers foreign individuals and businesses little or no tax liability in a politically and economically static environment).

Capital gains arising other than out of financial instruments are subject to income tax at 15%.

Sur Tax

Every entity has to pay certain amount calculated in form of percentage on income earned by any entity which surpasses the limit of 180,000 BRL. Sur Tax paid is calculated at 10% on the income.

Social Security

Every employer hiring/recruiting employees will have to contribute the funds estimating 8% to employees deferred account for the purpose of severance pay. Every employer is required to contribute 20% of the employees to employee’s pension fund additionally maximum amount of 8.8% contribution is paid to as other social security taxes.

PIS and COFINS are federal taxes imposed monthly on gross revenue earned by legal entities. The calculation method is generally non-cumulative, under which PIS and COFINS are levied on gross revenue at 1.65% and 7.6%, respectively, with deductions of input tax credits for expenses strictly connected to the company's business and prescribed by the regulating laws.

PIS: Program Social Integration is a fund or pool of fund used for the process of providing financial aid to unemployment insurance system. PIS is a mandatory employer contribution to an employee savings initiative.

COFINS: Contribution for the Financing of Social Security it is a pool of security created for financing social security.

Serial Number

PIS(Program Social Integration)

PIS intends to insure financial aid to unemployment insurance system

COFINS(Contribution for the Financing of Social Security)

COFINS is fund created to aid Social Security

Imported Goods

Economic Domain

Actual

1.65%

7.6%

-

Deemed

0.65%

3%

-

Combined Rate.

-

10%

PIS and COFINS

Combined Rate.

-

-

11.75%

9.25%

-

Royalties

The general withholding tax rate on royalty payments is 15%, unless the rate is reduced under a tax treaty. The Contribution for the Intervention in the Economic Domain (CIDE) also is imposed at a rate of 10%.

Other taxes

IPI

The IPI is a federal excise tax levied on manufacturer's sales and imports and sales carried out by importers. As a VAT-type tax, the amount paid on imports and other taxed inputs are usually recoverable as tax credits to be offset against company's IPI output debits. The tax rates range from 0% to 330% depending on the type of goods. Typically, the average rate for the IPI is 15%.

ICMS

ICMS is a VAT levied by the Brazilian states on the circulation of goods and the provision of interstate and inter-municipal transportation and communications services. The tax applies even when a transaction and the provision of services commence in another country. A noncumulative tax, ICMS is collected by most states at the rate of 17%, except for São Paulo and Minas Gerais, whose tax rates are 18%. There are also interstate rates of 12%, 7% and 4%, depending on the location of the recipient and nature of the transaction.

ISS

The tax on services or ISS, a municipal tax, is imposed on the supply of services, other than services subject to ICMS. The list of relevant services is found in Complementary Law 116/2003. The taxable base of ISS is the price of the service rendered. ISS is generally levied by the municipality in which the company that provides the service is established, although in exceptional cases, ISS may be levied by the municipality where the services are performed. ISS rates vary between 2% and 5%, depending on the municipality and the type of service.

Brazil does not levy stamp duty and branch remittance tax,

POLICIES IN BRAZIL

Following are the list of the incentives applicable for taxable income:

  1. Federal Incentives: Special Tax regime is available for some specific economic activity and some section for entrepreneur. Any person applying for such benefits needs to comply with provision or conditions mentioned by legislation in this behalf.
  2. State Incentives: State wise incentives will be provided by the state legislature to some specific business section. State legislature may provide incentives up to 95% of the value but varies from state to state.
  3. Municipal Incentives: Several Municipal authorities provide tax and non-tax benefit to promote investments and business expansion for overall economic growth.
  4. Regional Incentives: Brazilian government has implemented schemes and incentive plans to develop regions in the country.
  5. Other Incentives are provided by the government in various forms:
  1. The tax incentives provided by the government is on imported industrialized products through non-cumulative system.
  2. All expenses are exempted if applied for Research and Development. Deduction of extra of 160% is allowed for any research and development conducted which has a technological base or it is a technological based innovation from the income of IPRJ and CSLL.
  3. IPI exemption will be provided up to the rate of 70% till 31st December, 2019.

http://receita.economia.gov.br/information/

https://www.bakermckenzie.com/-/media/files/expertise/ma-resources/Doing_Business_In_Brazil.pdf

http://receita.economia.gov.br/orientacao/tributaria

CARRY FORWARDING OF LOSSES

  1. Startups can amortize or defer preliminary losses on the straight-line basis.
  2. Net operating losses can be carried forward indefinitely.
  3. The cap limit on carrying forward such loss is 30% of taxable income before the net operating losses are being reduced.
  4. Corporate Tax can be provided exemptions and reduction only in certain less developed areas. Corporate investing in less developed areas will be allowed to take tax exemptions.

COMPLIANCE REQUIREMENTS

It is necessary to understand all compliance requirements for Companies to steer away any legal problems in Brazil. Following are the points required to be followed by the private limited companies:

  • A tax year of Brazil is from 1st January to31st December.
  • It is mandatory for every company to file annual returns verifying relevant details of the directors, address of principle place of business, details of shareholder’s and their holdings of the company.
  • Each company must file a separate return; consolidated return is not allowed in Brazil
  • Every entity is required to file an annual tax return for the previous calendar year by theend of July.
  • Corporate taxes on due are usually adjusted against the annual profits of the company.
  • A private company of Brazil is required to maintain a local registered address.
  • It is necessary to appoint a Brazil legal representative to act as a sponsor in each foreign company. A legal representative can be a Brazilian or a permanent resident.
  • Foreign ownership is restricted in the nuclear energy industries, health services, aerospace and postal services.
  • In Brazil, employers need to provide additional benefits like health benefits, life insurance, dental plan, meal allowances, employee loans, pension funds, medical checkups, prescription drug benefits for employees.
  • Public companies must publish annual financial statements in a national newspaper, though they need not be audited. It is not necessary for Brazilian LLCs to publish annual financial statements.
  • Commercial companies are required to publish a balance sheet, profit and loss statement, statement of Cash flows and the financial statements annually.

CONCLUSION

As per the report of World Bank ranking with regards to the ease of doing business, it can be concluded that Brazil is a relatively tough place to start a business as the country had ranked 120th out of the participating 183 countries in the survey to check the ease of doing businesses in different countries around the world. But that does not take away the fact that Brazil is a profitable country where businesses if started well, can thrive and truly be able to earn its best potential.

As stated by Carl Farrel, the Chief Revenue Officer at data analytics powerhouse SAS, “Brazil is very resilient, it will weather the crisis and continue to prosper — it’s an economy that’s got lots of resources, people, and all the geographic connections that it needs.”

INTRODUCTION

With a low tax rate on corporate and given its liberal nature of the economy, Switzerland has been one of the desired locations to incorporate a business in the world. Switzerland has been one of those countries where political stability is of an appreciable nature.

Switzerland as a country with the limited area restricting the renewability of its resources has formed its economy in a way that it is more inclined towards foreign trade, its most of import quotas are in the agriculture sector which as compared to other is very minimal in nature. Switzerland is a country which is known for its less import duties. In addition to all its advantages, it provides a market of 500 million customers for any foreign company willing to incorporate in Switzerland. The country has its advantage of duty-free trade due to its treaties and agreement signed with the European Union. Switzerland has one of the best infrastructures for carrying out business in the country; it has the best quality of financial systems and a more efficient and reliable regulatory environment. A highly skilled workforce has made Switzerland a desirous location for any foreigner wanting to incorporate its workplace or headquarters in Europe. One of the added benefits is the taxation rate for corporates; it provides one of the lowest value-added tax, i.e. 7.7 %.

As also termed by many other financial rating firms, Switzerland stands to be a financially stable economy and is known to have the largest financial centres. When it comes to corporate, the Swiss bank is one of the largest banks in Switzerland providing top-notch service, i.e. Banking services, Investment Services, Insurance services and all other required services for the company, not only the stable banking condition but Swiss-Franc is tax haven in case of currency stability.

The country has implemented the automatic exchange of information in the group of Organization for Economic Co-operation and Development (OECD). All in all, Switzerland is an excellent jurisdiction for global parent companies, IP holding, banking, international trading and European headquarters.

INVESTMENT LAWS

In Switzerland, foreign firms do not need formal approval for direct investment. However, in certain sectors like establishment of a bank or an insurance company, government permission is mandatory.The country is used as a location for international headquarters andother entitites. Such firms are treated in the same way as the local companies.

PROMOTIONALPOLICIES

Promotional policies are the one significant aid formulated by the government in setting up a business-friendly environment. This type of policies is formed to order to attract the business or investments in the country this in turn will result in economic growth of the country.

Following are the various promotional policies formulated for growth of business in Switzerland:

  1. Cantonal promotion

Every canton in Switzerland provides different type of economic benefits or exemption to businessmen in form of tax relief, assistance in funds for capital, etc. Various schemes and benefits differ from canton to cantons.

  1. Regional Policy

Federal Government provides various assistance including funds relief and tax relief depending upon the region and its necessities.

  1. Switzerland Innovations

Switzerland Innovation offers domestic and foreign business in Switzerland’s first-class locations for developing innovative ideas into marketable products

  1. DTAA

In promoting the ease of doing business in Switzerland, it holds double tax agreements (DTAs) with several countries. A double taxation Avoidance Agreement is a treaty entered between two countries for reducing the burden of paying double tax on the same income. It generally takes place between two countries where a person is earning income in one country and repatriating it in some other country. To avoid the confusion between the two countries on who will be the actual assessor of the person’s income this treaty is formulated. Due to Globalization business houses are going for expansion beyond the borders, it plays a significant role in deciding the net profit and net tax payable. Below is the list of countries that are a signatory with Switzerland.

https://www.lowtax.net/information/switzerland/switzerland-tax-treaty-introduction.html

FORMATION OF THE ENTITIES

Recognizing the business structure plays a vital role before setting up the company or business in Switzerland. There area lot of factors to be considered before setting up a business in Switzerland. The structure decided for business will have an impact on not just the financial investments but also on variouslegal and tax implications.

Following are the type of business that can be set up in Switzerland

  1. Sole Proprietorship:

A sole proprietorship is the type of business where one person owns the whole business. Such business is better for the company, freelancers and owners of the small business. The legislature governing businesses in Switzerland states that any business where the annual turnover or sales is estimated more than CHF 100,000 must be registered with the commercial registry.

  1. General Partnership:

A General Partnership is a type of business which is owned by more than one person or a group of people. The business hasits liability extended to the partner’s personal assets, the entity has no separate legal distinction in the eyes ofthe law.

  1. Limited Liability Partnership:

This form of partnership is alike the partnership mentioned above, but this type of business is registered and has the limited liability clause, where such liability is limited to the investment made by the partners in the partnership or as per the agreement made by the partners in their behalf.

  1. Corporation limited by liability:
  • Subsidiary Company: A person willing to incorporate a company in Switzerland has an option either to incorporate a parent company or a subsidiary company. A subsidiary company is a company which is an extended version of the parent company that deals in a different location in the same sector or a different sector where such company is accountable to the parent company.
  • Parent Company: A parent company is a limited liability company. This type of company has the condition prerequisite to the process of incorporation. The condition required is that any person willing to incorporate a limited liability company needs to have minimum shareholder’s equity of CHF 20,000. At least one director who will be responsible for signing any required documents of the company should be a Swiss resident. The shareholders of this company are jointly liable for the debt of the company to the extent of unpaid share value. The shares are to be listed on Commercial Register.
  • Corporation/ Joint Stock Company: This is the most common type of business that has been set up by foreigners.

The few conditions that are required to be followed by the corporation or joint-stock companies are as follows:

  • A member should be a Swiss resident having a sole signatory right.
  • There can be appointed two members or directors having a joint signatory right, but both person should be the Swiss resident.
  • Limited Liability is up to the extent of the registered capital of the company.
  • The minimum requirement of shareholder’s value should be CHF100,000.
  1. Branch:

A branch office of any corporate is legally dependent but has complete independence in its financial arrangements. Such a company will be treated as a Swiss company and will be taxed accordingly.

https://www.easygov.swiss/easygov/#/setup-company

DOCUMENTS REQUIRED FOR INCORPORATION OF AN ENTITY

Corporation: Public deed of incorporation, certified articles of incorporation and bank confirmation stating that the promised cash contributions have been made to an escrow account.

Other registration requirements: The name and address of the firm,appointment of the board of directors and auditors, authorization of the persons who are representing the company, application for the entry in the commercial register.

Limited Liability Company: Public deed of foundation, certified articles of incorporation and bank confirmation that the indicated cash contributions have been made to an escrow account.

Other registration requirements:Name of the firm and address, the appointment of the auditors, application for the entry in the Commercial Register accompanied with a list of the names of all shareholders, their domicile and nationality as well as the amount of each contribution; a list with the names of each managing officer; and details regarding the manner in which the company shall be represented.

How long (approximately) does this process take from start to finish?

Approximately 2-3 weeks

What are the minimum management requirements (e.g. types of the officeholder or nationality requirements, etc.)?

Corporation: For the incorporation process of the company, it ismandated that a person should appoint one or more natural person asits director.

The mandatory requirement for the incorporation process is that any director appointed on the board of the company should be domiciled in Switzerland, but it is not important that such aperson should have the citizenship of Switzerland.

Limited Liability Company: It is mandated that every member of the company should workin the management team with its equal prudent way. But for the purpose of the management of the company,it can appoint any person as the officer who should be domiciled in Switzerland but should not compulsorily be the citizen of Switzerland.

BRIEF VIEW OF PROVISION OF TERMS FOR INCORPORATION

Shareholders

Corporations may be formed by one or more shareholders, who can be either natural or legal persons, residents or non-residents, without limitations. Details of shareholders are not available to the public.

Directors

The business activities of a Swiss corporation are managed by its board of directors. The board may consist of one or several members, who cannot be legal persons and need not to be shareholders of the corporation. At least 1 director should be a Swiss resident director and in case of more than 1 director, the majority of the board of directors should be Swiss residents. Details of directors are publicly disclosed.

Registered Address

Any person willing to incorporate the company should always have a registered office of the company in Switzerland to look after its affairs and maintain the documents if required for review.

General Meeting

General Meeting is an annual meeting of the company’s shareholder for the purpose of deciding some of the matters to the company. The law regulating Corporate in Switzerland states that any company incorporated should hold its meeting with six months of its incorporation. The meeting held should be located in Switzerland with the presence of a maximum number of members. The physical presence of every member concerned is mandatory no other way of presence will be accepted or any way electronic presence is not allowed. Any shareholder is allowed attendant the meeting can be allowed to attend such by way of proxy.

Compliance

A Swiss Corporation must maintain accountingrecordsof CHF in Switzerland. Companies are required to submit an annual return together with their financial statements, and a tax return to the relevant Canton authorities.

Auditing

All the financial statements by the companies are to be audited annually. All or any of the business entities which have been registered or being given state license needs to conduct an audit of their accounts. There are specific incorporated companies in Switzerland doing acore business of an accounts audit of the companies in Switzerland.

Secretary: It is advisable to appoint a Company Secretary to ease the process of incorporation.

Electronic Signature: Permitted.

Re-domiciliation: Inward/outward re-domiciliation is not allowed.

PROCEDURE FOR INCORPORATION OF SEPARATE LEGAL ENTITY

Following are the steps to be followed for incorporating a separate legal entity.

1. Choose Legal Structure:

2. Choose a Company Name:

3. Articles of Incorporation:

4. Paying Minimum Paid-up Capital:

5. Notarization:

6. Commercial Register:

INTELLECTUAL PROPERTY RIGHTS

With a well-developed economy Switzerland also have well-structured law for the protection of patents, trademarks, copyrights and designs. The law not only helps to provide protection to innovation and creativity at the national level but also protect it at international level. Patent applications and trademark or design registrations can be submitted to the Swiss Federal Institute of Intellectual Property (Eidgenössisches Institut für Geistiges Eigentum, IGE) in Bern. Any person willing to file an application or register its patent, copyright, trademark, design, topographies of semi-conductor products can submit their application to IGE, which by the law is an establishment set-up to provide assistance for any such process.

  1. Patents:
  • A person if register the patent with IGE under the category of national registration then such registered patent will be protected within the nation and in the principality of Liechtenstein. A person can submit the application for granting the patent in any language but such application should be translated in either of three languages i.e. German, French and Italian submitted within the stipulated time period.
  • EPC (European Patent Convention) provides protection of patent among member countries.
  • Paris Cooperation Treaty helps a person to file application for grant of patent at international level. A person can file for grant of application at IGE in English, if IGE approves such patent will have the same protection as at national level in the member countries.
  • Patents expire after a maximum of 20 years.
  1. Trademarks:
  • Any person can register the trademark under the national registration category, such grant will protect the trademark with the national border of the country.
  • Any person can file for international protection of trademark under the Madrid System on the basis of the national trademark. A person can apply with a single application in an individual signatory among other countries of his/her choices by submitting the application to WIPO in Geneva.
  •  In Switzerland trademark application can be sent electronically by paying 550 Swiss francs as the fee towards grant/approval.
  • Protection of trademarks can be provided for a period of ten years such protection can be extended as many times as required by renewing the ownership after every ten years by paying extension fees. The filling fee (in Switzerland) is CHF 550. The renewal fee (for 10 years) costs CHF 700.
  1. Copyrights:
  • No registration of work is required under the Copyright law; the work is protected as soon as it comes into existence in Switzerland.
  • In Switzerland the copyright work is protected up to seventy years after the death of the creator except computer program; it’s only protected for a period of fifty years.
  1. Designs:
  • Designs in Switzerland are easy, amicable and cost-effective for registration.
  • A designs protection can be providing up to twenty-five years in slots of five years period.
  • Due to Hague agreement and Switzerland being Signatory to it any registrant can acquire an international protection for Industrial Designs.

The following government website will assist you in understanding your IP protection: https://www.ige.ch/en/protecting-your-ip.html

Switzerland is a part of several international treaties to accommodate international filings.

Conventions

Signatory

World Intellectual Property.

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Berne Conventions

?

PCT

?

Paris Conventions

?

Madrid System

?

Doha

?

Universal Copyright Convention

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Nice Agreements(International Classification of Goods& services)

?

Geneva Convention (phonograms)

?

First to use or First to File

First to use

* First to Use: In order to acquire ownership of an IP, it is not enough to have invented the mark first or even to have registered it first; the party claiming ownership must have been the first to actually use the IP in commerce. 

Tax Structure

Tax is the revenue of the state or any country levied on the income of any person or corporate earned by using the resources of the country. Following are the provisions in the tax system of Switzerland.

  1. Corporate Tax:Tax is levied on federal as well as communal level. Corporate tax applicable depends on worldwide income and on canton and community of residence, taking into account both of these tax structures, the corporate tax rate may vary from 12% to 18% on profits before taxes, depending on the place of residence.
  1. Capital Tax:A capital tax is a distinctive feature of Switzerland that can inflate the tax bill depending upon the canton. Capital tax is levied at the Communal and Cantonal levels and not at the federal level. There is no specific capital gains tax levied on the federal level.
  1. Stamp Duties:1% stamp duty is levied on contributions to the equity ofSwiss company. A stamp duty is payable to state or authority in Switzerland if the capital formation in equity exceeds 1 million CHF. The organizations such as mergers, spin-offs of corporate assets or transfers of a domicile of the country from abroad to Switzerland are exempt from stamp tax in certain cases.
  1. VAT: VAT is applicable depending on the activities performed.It is a general consumption tax levied at a rate of 7.7% on most commercial exchanges of goods and services. Certain exchanges, including those of foodstuff, drugs, books and newspapers, are subject to a reduced VAT of 2.5%. Yet other exchanges, including those of medical, educational and cultural services, are tax-exempt, as are goods delivered and services provided abroad.Any company that performs commercial activities within Switzerland that exceeds the threshold of CHF 1,00,000 is liable for VAT.
  1. Cantonal Tax:The cantons are free to decide their own tax system and rates depending on the Canton and the municipality.
  1. Withholding Tax
  • There is a with holding of tax on dividends and interests. Dividends paid to a nonresident are subject to withholding tax of 35%.
  • Under the domestic law, no withholding tax is levied on interest
  • Switzerland does not levy a withholding tax on royalties
  • Switzerland does not levy a withholding tax on service fees
  • Switzerland does not impose a branch remittance tax

https://www.gov.uk/government/publications/exporting-to-switzerland/doing-business-in-switzerland-switzerland-trade-and-export-guide#tax-and-cust%20oms-considerations oms-considerations

Switzerland has a unique corporate tax system among European Countries. In 2015, the country started a legislative initiative to enact tax reform to conform with European Standards to keep the country attractive to the investors. The main complaint of international community about the Swiss tax system was the existence of preferential tax regimes for cantonal holding companies.

Tax reformation was initially motivated by the agreement made between the Swiss government and the European Union to conform the Swiss tax system to standards suggested by the Organization for Economic Co-operation and Development (OECD). Following are the effects expected to come in effect by 2020:

  • All companies doing business in Switzerland will be subjected to the same tax rate. Swiss cantons will no longer be able to lower the corporate taxes of multinationals.
  • Taxes levied on dividends will be increased and cantons will receive a higher share of federal tax collections.

It is estimated that the reform will lead to an annual decline in corporate tax revenue of CHF 2.2 billion n the short term. The main objective of the reforms is to keep Switzerland attractive business location.

https://taxfoundation.org/switzerland-tax-reform/

Treatment of losses

Losses may be carried forward for 7 years and may be set off against any income including capital gains. Losses may not be carried back.

COMPLIANCE REQUIREMENTS

All companies registered in Switzerland are required to follow certain conduct in their business activities. In order to follow the conduct, the company managers create corporate compliance regulations which are meant to ensure the legal requirements imposed by the Swiss Commercial Law.

  • A tax year of Switzerland is from 1st January to31st December.
  • It is mandatory for all LLCs (Limited Liability Companies - Gmbh) and Public Limited Companies (AG) to publish their list of shareholders.
  • The country mandates the majority of board members of a Swiss AG be resident or citizen of Switzerland.
  • Each company in Switzerland is required to file a separate return; consolidated returns are not permitted in the state.
  • AG companies can issue bearer shares only if the entire share capital (US$110,000) is fully paid. LLC’s of the state cannot issue bearer shares.
  • It is mandatory to hold an annual general meeting within 6 months of the end of the year.
  • The resident firms of Swiss must pay payroll taxes for foreign employees who do not hold a permanent residence in the Country.
  • There is a combined tax return filing for both federal and cantonal income tax purposes, deadlines for filing returns depends upon the canton.
  • Penalties may be applied for the late filing of the income tax return or failure to file returns.
  • All Swiss listed companies must have their accounts audited.
  • Types of the audit depend upon the company’s size, listing and obligation or preparing consolidated financial statements.

CONCLUSION

Switzerland, a country which is home to fifteen companies out fortune 500 companies including Roche, Novartis, etc provides immense opportunities for any start-up. Country’s government is the most supportive facilitator in ways of funding and other benefits. The government here has tripled the investment for many start-ups promoting the business environment in the country. Switzerland being a part of Europe provides a pathway to the European markets, also with the rich infrastructure facilities business here can be smoothly administered. Many tax exemptionshas been provided by the authorities promoting and helping profits to be repatriated to the resident country with some regulations to comply. With in-detailed discussion over the topic, Switzerland can be one of the countries to set-up business helping the foreign entrepreneur to hold valuable position in the European Market.

INTRODUCTION

Honk Kong being the sixth livable city in Asia, has the potential to provide new business opportunities resulting in the growth of business and exploiting the other privileges offered by the country. Honk Kong, with a literacy rate of ‘ninety-six’ percent has no shortage of skilled labor coupled. With excellent literacy rate, the computer literacy rate in the country is of ‘ninety-five’ percent. Honk Kong with an international market has a privilege of bilingual population, people in Honk Kong are generally found with an acquaintance of mainly Cantonese or mandarin language and most important is that people here communicate in English making it easy for international businessmen. This location helps the employees to understand the culture followed by corporates in the mainland of China that provides the leeway to do business with China. Various advantages like tax exemption and extraction of funds by way of dividend, management fees and royalties paid to the businessmen incite to conduct business in the country. Honk Kong is said to have a particular administrative region of China and provide an opportunity to deal with one of the world’s largest economy in the world.

Honk Kong provides a market place of 450 million people with an easy access to China. Honk Kong is known’s as the highest source of investment to China. There is an excellent infrastructure set up in Hong Kong and the southern provinces of China including air, rail and road links. Hong Kong and China have signed the Closer Economic Partnership Agreement (CEPA). This is a free trade agreement to provide Hong Kong’s manufacturers and supplier’s preferential access to the Chinese market. Hong Kong boasts the world’s 2nd best infrastructure in various forms such as seaport, a heavy scheduled cargo airport and advanced rail and road systems. As such, Hong Kong is usually considered as the preferred choice in Asia. Hong Kong’s location gives companies easy access to mainland China, Indian and Australian consumer markets. Many international banking companies and other service sector companies have their hubs based in Honk Kong. Hence any company willing to incorporate its base here does not experience financial obstructions due to such good financial centres. In 2015, ‘Business of Cities’ report released by Jones Lang Lasalle lists Hong Kong as the world’s 2nd most business-friendly city.

INVESTMENT LAWS

Nonresidents and foreign companies (including their branches) carrying on business in Hong Kong are treated in the same way as domestic companies.

There is no distinction made between residents and non-residents when it comes to liability to profits tax.  A resident may therefore derive profits from abroad without being charged to tax; conversely, a non-resident may be chargeable to tax on profits arising in or derived from Hong Kong.

https://www.gov.hk/en/nonresidents/investinghk/taxinhk.htm

ADVANTAGES OF INCORPORATING A BUSINESS IN HONK KONG

Amicable Incorporation Process

With a well structured legal system and transparent authorities working in the way of developing a liberal but organized environment for the incorporation of companies, it is claimed that a company in Honk Kong can be incorporated in the of a week.

Structured Legislature

As the legislature is in compliance with the common law system, it increases the scope of incorporating a business plan in Honk Kong for not just the residents but also for foreigners as they will be well aware of theworking process and administration of the legislature.

Minimum Requirement policy is applicable

As the incorporation process is amicable, it also provides the privilege to any person willing to set up business in Honk Kong. The privilege provided by the legislature is that a person can appoint one person as director and another individual person as a shareholder for the process of incorporation, more members are not required.

Corporate Tax

Honk Kong charges one of the lowest taxes to corporates in Asia. The country charges the tax at the rate of 16.5% to corporates.

No Language Barriers

Though Chinese is one of the official languages in Honk Kong, English is preferred when it comes to doingbusiness in the country. The documents in Honk Kong are in English and Chinese, which helps the foreigners in understanding the process without requiring any external support.

Foreign Investment State

Resident companies can invest in any industry without government restrictions regardless of the nationalities of their owners. This is said to be one of the significant featureswhere foreigners are willing to enter the Honk Kong market.

Treaties for Double Tax avoidance

In promoting the ease of doing business in Hong Kong, it holds double tax agreements (DTAs) with several countries. A double taxation Avoidance Agreement is a treaty entered between two countries for reducing the burden of paying double tax on the same income. It generally takes place between two countries where a person is earning income in one country and repatriating it in some other country. To avoid the confusion between the two countries on who will be the actual assessor of the person’s income this treaty is formulated. Due to Globalization business houses are going for expansion beyond the borders, it plays a significant role in deciding the net profit and net tax payable. Below is the list of countries that are a signatory with Hong Kong.

https://www.ird.gov.hk/eng/tax/dta_inc.htm

Opening of Bank Credit policy

The city is ranked as the 4th best place in the world to get credit from the bank.Obtaining bank credit is relatively easy in Hong Kong which in turn helps in financing a corporate entity.

TYPES OF ENTITIES IN HONK KONG

  1. Limited Company

Limited Companies in Honk Kong has non-restricted exposure; it can spread its operation as and when allowed by law in any sector that makes the limited company a more popular option as compared to any other options. Only on the overseas income, the privileges related to tax exemption will be enjoyed by the Limited Companies. Thus, it is always feasible to open/set-up/incorporate as holding a company or headquarters of the company. The process of opening a company is amicable in Honk Kong including:

  1. only one director (of any nationality)
  2. only one shareholder (of any nationality)
  3. A Resident Secretary.

As for long, major countries are complying with English laws stating the corporate. Once the register is said to be a distinct entity to its promoters, Honk Kong incorporates the same policies. Therefore it is easier to inculcate the administrative rules of corporate in Honk Kong. The corporate directors are not allowed under Hong Kong company law,whereas, the corporate shareholders are common. No specific approval is required for the purpose of incorporating the limited liability company from Honk Kong government and no pre-required capital requirement is the condition for the process of setting up a limited company. There is no restriction on capital denomination invested in Honk Kong; a person willing to incorporate limited company can invest in any denomination, i.e. USD, EURO, HKD, etc.

  1. Branch Office

A branch office is basically an extension of the registered business working under the control of the company. A branch office has no separate legal entity. Any positive or negative effect on the income of the company shall be attributed to the parent company. A set up of the branch office in Honk Kong can conduct trade and business in the scope set by the parent company.Any business required to be conducted will be restricted by the legislature to the limits of Honk Kong along with appropriate license in this behalf. Any company registering a branch office in Honk Kong will be allowed to start trading or conduct any other business activities a month prior to the actual registration. Any foreigners setting up a company is required to register with the registry and any person setting up branch office needs to register as NON-Honk Kong Registered branch Office. The set-up of branch officesis allowed to conduct all such activities mentioned in law on behalf of Company such as signing the contracts or any other documents validating the transaction, etc. After considering the various advantages, it is feasible for the company to start its business immediately. The advantage of starting the branch offices is that it is not necessary for them to submit its audited financial statements for any purpose.

  1. Representative Office

As per the rules and regulations of Hong Kong, no company having representative status will be allowed to make any direct sales in the country. It can engage in the following activities:

  1. Promoting the parent company’s business.
  2. Conduct market research.

Any company having status as the representative office to provide local services, such offices should be incorporated in Honk Kong.

  1. Offshore Company in Honk Kong

It’s of great advantage to any company to house or investfunds or gain profit in Honk Kong by setting up an offshore company and repatriate funds by receiving the benefits of minimal tax policy. There would be a 100% tax exemption to any company who hasn’t conducted any transaction.An offshore company can quickly set up in the country like Hong Kong. For the process of incorporation of the company, it requires only one director and one shareholder. Both can be of any nationality. Incorporation of the company takes one week. Hong Kong’s banking system is considered as one of the most secure in the world and the government has strong client confidentiality guidelines. Setting up an offshore company in Hong Kong is not considered as a tax avoidance strategy and as such, it is easy to open corporate bank accounts.

  1. Subsidiary Company

Any company incorporated as a private limited company under the holding company conducting its performance in a different sector or same sector is known as the subsidiary company. Laws governing the corporate and other matters relevant to companies, provide the investment limits up to 100% foreign money in a company.

With numerous tax advantages and other benefits, it became a necessary measure to incorporate the subsidiary company. As the limited liability principleis applicable in Honk Kong, the debts or any liability will not be applicable to its parent company. Any company incorporated by a parent company will have the advantage to achieve its growth in the Chinese markets.

Following are the basicrequirements for registering a Subsidiary Company

  • Approval of the company name
  • Local registered address
  • At least one director and shareholder
  • A local resident company secretary and an auditor
  • The company must have share capital but there is no minimum requirement.
  • For taxation purposes, a subsidiary is treated as a Hong Kong resident company and is eligible for tax exemptions and incentives applicable to the local companies.

PROCEDURE FOR INCORPORATING COMPANY IN HONG KONG

  1. Name of the Company – The company name must be approved before proceeding with the incorporation process of a Hong Kong company.
  1. Ordinance of the Companies– As per the amendment, effective from 1 March 2018, every company incorporated in Hong Kong, except for those listed in the Hong Kong Stock Exchange (HKSE), will be required to create and maintain a register of all persons who have significant control of the company. A Designated Representative (DR) must be appointed by the companies, who will be responsible for reporting to the prescribed local authorities about the reports relating to SCR upon their demand.
  1. Directors – A minimum of one individual director and the unlimited number of directors are allowed in the formation of the company. The director must be a natural person who can be of any nationality and need not be a resident of Hong Kong. Directors must have completed at least 18 years of his/her age and must not be convicted for any malpractices or bankrupt. There is no requirement for the directors to also be the shareholders. In addition to the individual director, nominee corporate directors can also be appointed. The Directors Board meetings can be held anywhere in the world.
  1. Shareholders – In Hong Kong, a private limited company can have minimum one shareholder and a maximum of 50 shareholders. There is no residency requirement for the shareholders. A director and shareholder can be the same or different person. The shareholder must have completed at least 18 years of age and can belong to any country. The shareholder can be a person or a company. The company law allows 100% local or foreign shareholding. Appointment of the nominee shareholders is permitted. The meetings of shareholders can be conducted anywhere in the world.
  1. Company Secretary – Appointment of a company secretary is mandatory. The secretary, if an individual must ordinarily reside in Hong Kong; or if a body corporate must have its registered office or a place of business in Hong Kong. It has to be noted that the same person cannot act as the company secretary, in case of a sole director/shareholder. The company secretary is responsible for maintaining the statutory books and all other records of the company. The Secretary must also ensure the compliance of the company with all statutory requirements. A nominee secretary can be appointed.
  1. Share Capital – Although there is no requirement of minimum share capital, the general norms for the incorporation of companies in Hong Kong is to have at least one shareholder with one ordinary share issued for the formation of the company. Share capital can be expressed in any major currency and is not restricted to the Hong Kong Dollar. Shares can be transferred freely, subject to the stamp duty fee. Bearer shares are not allowed.
  1. Registered Address – In order to register a Hong Kong company, it is necessary to provide a local (Hong Kong) address as the registered address of the company. The registered address must be a physical address and cannot be a PO Box.
  1. Public Information – As per the Company laws of Hong Kong, any information about company officers viz. directors, shareholders and company secretary is public. It is mandatory to file details of the company officers with the Hong Kong Registrar of Companies. If any company wishes to maintain confidentiality,it can appoint a corporate shareholder and a nominee individual director by utilizing the services of a professional services firm.
  1. Taxation – Corporate tax, (or profits tax as it is called), is set at 16.5% of assessable profits for companies setup in Hong Kong. Hong Kong follows taxation on a territorial basis,i.e. only profits which arise or derived from Hong Kong are subject to tax in Hong Kong. There is no capital gains tax, withholding tax on dividends, or GST/VAT in Hong Kong.
  1. Ongoing Compliance – It is mandatory for companies to prepare and maintain accounts. Accounts must be audited annually by Certified Public Accountants. The audited accounts together with tax return must be filed annually with the Inland Revenue Department. It is necessary for every company to file annual returns with the Companies Registry and pay the annual registration fee. The Business Registration Certificate should be renewed, one month before expiry on an annual basis or once every three years, as the case may be. An Annual General Meeting (AGM) should be held annually every calendar year. The AGM should be held within 18 months of the date of incorporation, after which no more than 15 months can elapse between one AGM and the next. A written resolution in lieu of the Annual General Meeting is permissible.

Usually, it takes about 5-7 working days to incorporate a company in Hong Kong.Following points are to be considered by any person who is willing to incorporate an offshore company:

  1. There are no local resident requirements; an offshore can be set up by sole directors.
  2. Every bank may have different rules and regulation,although no physical presence is required at times of incorporation of the company, it is always preferable to be present at the time of opening of a bank account.
  3. Any foreigners willing to operate his/her business from overseas can do if he/she chooses not to relocate his business in Honk Kong.

DOCUMENTS REQUIRED FOR INCORPORATION

Any person who wishes to incorporate a company in Honk Kong needs to comply with the documentation required to fill in the registrar

  1. A copy of the Articles of Association for the company. A standard document normally provided by the professional services firm who is assisting with the incorporation of the company.
  1. A duly completed incorporation form that includes the following:
  • Name of the Company
  • Registered address
  • Brief description of business activities
  • Particulars of shareholders, directors and company secretary
  • Liability of members
  • Share capital registered on incorporation
  • Number of shares taken up by subscribers
  1. For non-resident shareholders and directors:
  • Copy of passport, overseas residential address proof
  1. For resident shareholders and directors:
  • Copy of Hong Kong identity card
  • Copy of residential address proof
  1. For corporate shareholders and directors:
  • Copy of parent company registration documents such as Certificate of Incorporation and Articles of Association

IP IN HONG KONG

An intangible asset that is the result of creativity results in forming of Intangible asset. An intellectual property right is the right of a person on his/her creativity, and it is important for a person to protect such property from being copied/ plagiarized.

IP schemes

Working Group on Intellectual Property (IP) Trading releases report for driving the development of Hong Kong as an IP trading hub. The Intellectual Property Department of the Government of the Hong Kong SAR, with support from the Law Society of Hong Kong, provides FREE One-On-One IP Consultation Service for Hong Kong small and medium enterprises (SMEs) with a view to assisting Hong Kong SMEs to raise their awareness of intellectual property (IP), as well as to develop effective IP management and commercialization strategies and to deal with possible challenges in the competitive environment.

https://www.ip.gov.hk/en/resources/policy-initiatives.html

https://www.ip.gov.hk/en/resources/free-consultation-service.html

Following are the protection allowed by Hong Kong authorities in case of Intellectual Property

  1. Patents

Any new/ innovative steps introduce by someone that can be acknowledged or acceptable in terms of industrial application can be termed as a trademark.Hong Kong Special Administrative Region(HKSAR) provides only territorial protection to trademark. Any person needs to follow two-stage application processes in case of registration patent first application of patent and grant of patent. Standard HKSAR provides a protection of patent for the period of 20 years and then patent is applicable for registration. (A standard patent will last for a maximum term of 20 years, subject to the payment of renewal fees. A short-term patent will last for a maximum term of 8 years subject to the payment of renewal fees.)

  1. Copyrights

Any type of literally work or artistic work by a person will be granted protection under the Berne Convention, the WIPO Copyright Treaty and the WIPO Performance and Phonograms Treaty to the HKSAR. The duration of copyright of literary, dramatic, musical and artistic works is the life of the author plus 50 years.

  1. Trademark

A trademark is a sign that distinguishes the goods and services of one trader from those of others. Typically a trademark can be words (including personal names), indications, designs, letters, characters, numerals, figurative elements, colours, sounds, smells, the shape of the goods or their packaging or any combination of these. A sign must be capable of being represented graphically in order for it to be registered as a trademark.A registered trademark is valid for ten years from the filing date and is renewable indefinitely for further periods of 10 years each by paying the renewal fee. Trademarks in Hong Kong may be renewed within six months before the expiry of the validity term but not later than six months after its expiry.

  1. Layout out Design

Any person inventing a news design for layout will be provided protection under the Layout-design (Topography) of Integrated Circuits Ordinance any person copying the design will be held liable and civil action can be taken against.

The duration of layout-design (topography) of integrated circuits protection depends upon whether such layout-design (topography) is commercially exploited. If a layout-design (topography) has not been commercially exploited anywhere in the world, the term of the protection will end 15 years after the end of the year in which it was created. On the other hand, if a layout-design (topography) has been commercially exploited anywhere in the world, the term of the protection will end 10 years after the end of the year in which it was first commercially exploited.

However, a registered trademark may be challenged in revocation proceedings if it is not used in Hong Kong for a continuous period of 3 years.

  1. Plant varieties protection

Any person who is a plant breeder for a specific variety of plant can authorize others to reproduce his/her new plant variety. The Plant Varieties Protection Ordinance provides the protection for plant breeders. In Hong Kong, subject to the payment of annual grant fees, the right of a plant variety shall be in force for a period of:

  1. 25 years in the case of trees and vines, and
  2. 20 years in every other case.
  1. Trade Secrets

Trade secrets are the confidential information that have future economic benefit relating to a commercial transaction. In HKSAR, trade secrets are protected by the common law of confidence. The protection of trade secrets can be done by any person if he/she is of the opinion that the protection provided by patent law is not enough.

  1. Registered Design

Any new shape, pattern or ornaments applied to any article that resulted in the making of a new design or a unique product can be protected under the Registered Designs Ordinance, any person plagiarizing or producing a same or similar product will be held liable for the act. The producer of the design can take civil action against the person who copied or plagiarized the design. The registration of a design lasts for five years beginning from the filing date. It may be extended for additional periods of five years, up to a maximum of 25 years from the filing date.

https://www.ip.gov.hk/en/types-of-ip.html

Hong Kong has a robust IP environment. It is a part of several international treaties to accommodate international filings.

Conventions

Signatory

World Intellectual Property.

?

Berne Conventions

?

PCT

?

Paris Conventions

?

Madrid System

?

Doha

?

Universal Copyright Convention

?

Nice Agreements(International Classification of Goods& services)

?

Geneva Convention (phonograms)

?

First to use or First to File

First to File

* First to file: Applicants that are first to apply for registration of their marks are assigned IP rights and priority, irrespective of whether the Applicants have used the marks in commerce or whether the marks were used in commerce first by others. 

TAX STRUCTURE IN HONK KONG

Profits Tax Rate

  1. Normal Rate

Two-tier rates:

  1. For corporations, the first HK$2 million of profits earned by a company will be taxed at half the current tax rate (i.e., 8.25%) whilst the remaining profits will continue to be taxed at the existing 16.5% tax rate on assessable profits.

(The Assessable Profits {or Adjusted Loss} are the net profits {or loss} for the basis period, arising in or derived from Hong Kong, calculated in accordance with the provisions of Part IV of the I.R.O.)

  1. For unincorporated businesses, the first HK$2 million of profits earned will be taxed at half of the current tax rate (i.e., 7.5%) whilst the remaining profits thereafter will be taxed at the existing 15% tax rate.
  1. Concessionary Rate

A concessionary tax rate is available only for certain qualifying profits.

A concessionary tax rate at 50% of the normal profits tax rate will be applied to trading profits and interest income received or derived from Qualifying debt instruments (QDIs - https://www.ird.gov.hk/eng/tax/bus_qdi.htm) issued in Hong Kong, and to offshore business of professional reinsurance companies. The profits from QDIs, which are already taxed at 8.25% or 7.5%, would not be counted towards the HK$2 million threshold for the purpose of applying the two-tier rates. That means businesses with assessable profits derived from QDIs can continue to enjoy the half rate on all such profits and at the same time, their first HK$2 million of assessable profits that are not derived from QDIs will be taxed at 8.25% or 7.5%.

All taxpayers are subject to the same corporation or unincorporated business tax rate irrespective of their residential status.

https://www.ird.gov.hk/eng/tax/bus_pft.htm#a10

Provisional Profits tax

Profit tax is chargeable on the assessable profits for each year of assessment.

As the assessable profits for any particular year cannot be known until after the end of the year concerned, a provisional tax charge has to be raised. When the assessable profits for the year of assessment are subsequently ascertained, an assessment will be made and the provisional profits tax paid will be utilized to offset the tax liability under the assessment.

One may apply in writing for holding over of the whole or part of the provisional tax on the grounds as specified in the Inland Revenue Ordinance. Here you can learn more about the time limit, methods and grounds for application for holding over of provisional tax.

Time Limit for Application

Your application for holding over of provisional tax should be lodged not later than:

  • 28 days before the due date for payment of the provisional tax, or
  • 14 days after the date of issue of the notice for payment of the provisional tax,

whichever is later.

If the provisional tax is payable by two installments and the first installment has been settled by the due date, an application for holding over of the whole or part of the second installment may be made subject to the prescribed time limit and grounds for application.  Details about the time limit for applying for holdover of provisional tax can be found in the following link.

Frequently asked questions about time limit for applying for holdover of provisional tax

https://www.ird.gov.hk/eng/tax/bus_pft.htm#a05

Withholding tax

Is a tax applicable to residents and non-residents on earning any income from shares or other securities by way of dividend or interest. With liberal tax policy in Hong Kong there are no taxes applicable to residents and non-residents.There is no withholding tax on dividend distributions, interest payments, technical service fees and branch remittance tax from a Hong Kong entity to a resident or nonresident.

However, Royalties and fees paid to non-resident entertainers or sportsmen for their performances in Hong Kong are subject to withholding tax on their assessable profits. Generally, the withholding tax rate for royalty payments due to a non-resident company that is an associate of the Hong Kong entity is 16.5%.< style="color:red"> The objective behind levying a 16.5% withholding tax rate is to prevent taxpayers from minimizing their Hong Kong tax liability by entering into arrangements with associated companies or individuals. However, it must be noted that the withholding tax rate of 16.5% is restricted in its application. It does not apply to royalty payments made to an associate Hong Kong company or individual if the Inland Revenue Department is satisfied that “no person carrying on a trade, profession or business in Hong Kong has at any time wholly or partly-owned the relevant intellectual property.” In such cases a reduced withholding tax rate of 4.95% will apply.

https://www.guidemehongkong.com/business-guides/supporting-a-business/hong-kong-withholding-tax-guide

Royalty payments include:

  • Payments received from the exhibition or use of films, tape recordings, sound recordings, or any related advertising materials in Hong Kong;
  • Payments received for the use of or right to use any patent, design, trademark, copyright material, secret formula or other similar property in or outside Hong Kong; or
  • Payments received for imparting knowledge connected with the use of intellectual property in or outside Hong Kong.

Real Property Tax

Any person acquiring a property on rent will be liable to pay tax at the standard rate of 15%. It is calculated on the net assessable value of the property; however there is no capital gains tax. For capital expenditure on refurbishment of business premises, it is possible to write it off over a five-year assessment period. For plant and machinery, an initial 60% deduction is allowed for the capital expenditure, whereas, 20% of the written down value can be deducted for each year. 100% deduction is allowed for computer hardware and software, while 20% deduction each for five consecutive years is allowed for refurbishment expenses.

Social Security

The Mandatory Provident Fund (MPF) is a compulsory saving scheme (pension fund) designed by the Hong Kong government as a major protection scheme for aged and retired residents. According to the Mandatory Provident Fund (MPF) Ordinance, the employee will join the employer's MPF Scheme automatically after completing 60 working days. Employers and employees are each required to make regular mandatory contributions of 5% of the employee’s relevant income to an MPF scheme, subject to the minimum and maximum relevant income levels.

Any other taxes such as capital duty, payroll taxes and transfer tax are not applicable to residents and non-residents.   

Stamp Duty

Stamp duty is charged on documents connected with the lease, sale or transfer of immovable property and the sale of shares in Hong Kong. If property or shares are sold for less than the market value, stamp duty may be imposed based on the market value on the date of the transfer. The rate on the lease of immovable property starts at 0.25 percent of the total rent payable and stamp duty on the transfer of Hong Kong shares is 0.20 percent of the value of the shares transferred (which is shared by the seller and the buyer)

Other Taxes

Other taxes such as alternative minimum tax, surtax and VAT arenot applicable to resident and non-resident.

Treatment of losses

Losses made in an accounting year can be carried forward and set off against future profits of that trade.To qualify for deduction, losses should have arisen during the course of carrying on a business in Hong Kong. Losses can be carried forward indefinitely until they are fully utilized, subject to certain conditions such as no substantial change in shareholders.

Section 19C of the Inland Revenue Ordinance deals with the treatment of losses arising from a trade, profession or business. Section 19 C (6) makes it clear that a loss cannot be set off more than once and that the total amount set off against assessable profits is not to exceed the amount of loss.

https://www.ird.gov.hk/eng/pdf/dipn08.pdf

POLICIES

Below are some policies

Innovation and Technology Fund for Better Living

This Fund subsidizes innovation and technology projects which will bring more convenient, more comfortable and safer living to the public, or those addressing the needs of specific community groups.

https://fbl.itb.gov.hk/?lang=EN

Retail Technology Adoption Assistance Scheme for Manpower Demand Management (ReTAAS)

This Scheme provides funding support for eligible retail enterprises to adopt technologies to enhance productivity.

https://www.retaas.hkpc.org/tc/index.aspx

Social Innovation and Entrepreneurship Development Fund (SIE Fund)

The SIE Fund supports innovative poverty-alleviating projects of different forms and stages, from idea generation, prototype, and start-up to scale-up. The Fund has appointed Intermediaries to design and administer funding schemes. Organizations or individuals wishing to take forward innovative projects to address poverty problems may approach these Intermediaries direct.

https://www.hkstp.org/en/how-we-serve/incubation-programmes/

Trade and Industry Department Funding Schemes

 These schemes help small and medium enterprises (SMEs) in Hong Kong secure financing for acquiring business installations and equipment, and meeting working capital needs; expand overseas markets; and enhance the overall competitiveness of Hong Kong enterprises in general or in specific sectors.

https://www.smefund.tid.gov.hk/

CreateSmart Initiative (CSI)

 The CSI provides financial support to initiatives conducive to the development and promotion of the creative industries. Check out the details and eligibility criteria, and download the application form here.

http://www.createhk.gov.hk/en/service_createsmart.htm

Innovation and Technology Fund

This Fund aims to encourage and assist Hong Kong companies to upgrade their technological level and introduce innovative ideas to their business. There are four different funding programmes under the Fund. Find programme details, application deadlines, past projects and other useful information here.

https://www.itf.gov.hk/l-eng/about.asp

Technology Business Incubation Programme (Incu-Tech/Incu-Bio Programme)

 Hong Kong Science and Technology Parks Corporation's Incu-Tech/Incu-Bio Programme aims to provide a comprehensive package of assistance for technology start-ups. Eligible companies of three-year and four-year incubation programmes are granted financial aid of HK$639K and HK$851K respectively. Ready-to-use offices or laboratory premises up to 12 months rent-free and other forms of assistance are also provided.

https://www.hkstp.org/en/how-we-serve/incubation-programmes/

http://www.createhk.gov.hk/en/service_createsmart.htm

https://www.gov.hk/en/business/supportenterprises/funding/index.htm

COMPLIANCE REQUIREMENT

It is necessary to understand all compliance requirements for Hong Kong Companies to steer away any legal problems. Following are the points required to be followed by the private limited companies:

  • Appointment of a local Secretary for the Company.
  • Private limited companies need to sustain the required permits and licenses for the Company.
  • A local registered address for the company other than a P.O box.
  • Appoint at least one director for your company, the director appointed should be a local resident of Hong Kong.
  • It is necessary to maintain an audit for the proper accounting transactions of the Company.
  • Maintain at least one shareholder for your company, whether they are a foreigner or a local person, but they should be above 18 years-of-age.
  • The limited companies need to sustain the detailed records of the accounting transactions to determine the assessable profits of the business.
  • It is necessary to deliver the statutory returns to the Registrar of Companies for registration within the prescribed time in accordance with the requirements of the ordinance of companies.
  • It is required to maintain all documents and records for the company which includes the company seal, identification documents, incorporation certificates, financial records, share registers, members register, minutes of all meetings, share certificates for the business entities, etc.
  • All business owners are required to renew the registration documents one month before the expiry date on an annual basis or once every three years.
  • The companies should follow all requirements of the annual filing and other deadlines provided by the Hong Kong Tax Authority and Company Registry.

https://www.cr.gov.hk/en/compliance/annual-return/private-company.htm

CONCLUSION

Honk Kong is one of the cities which paves the way for foreign entrepreneurs to sell their goods into the Chinese market, as it is located in close proximity to China. Honk Kong’s location provides the benefit of being near to Pearl Delta River, which is responsible for China’s 30% exports. So location wise the city holds an important position to be considered for setting up a business. Honk Kong has signed CEPA and as per the provisions stated in CEPA, goods can be imported in China under zero tariffs.

A structured law and smooth administration helps to provide better protection of Intellectual Property Rights. Honk Kong being socially and politically viable country, it has advanced and provided immense opportunity for businessmen abroad.

INTRODUCTION

The liberalization of trade in goods and services, new ways of transport networks and advancement in information and technology have created significant opportunities for trade and transport industry. The increased level of competitions between public companies and private companies has led a lot of companies expanding their business beyond the national borders. Companies tend to shift from the regional and national strategies to the global strategies for exploiting opportunities outside the country in an attempt to survive market competition. Manufacturing companies are incorporating new techniques to satisfy the uniquedemands arising out of the expansion of a business.

Companies these days are taking steps to establish regional logistics & distribution centres, especially around ports to improve their competitiveness by reducing inventory and raw material procurement cost and by providing swift, just-in-time customer services and value-added logistics services. In line with these trends and to meet the expectation of growing demands also with strengthening the competitive position of the organization's many Asian countries have established or intended to establish the value-adding zones in port areas or in the wider hinterlands with an expectation of the higher economic benefits that these zones may bring. The zones are commonly known as the Free Trade Zones. The rules and regulations of the Free Trade Zones are different for different countries and it also depends on various factors of the countries, including the geographical locations, following which it has resulted differently for each country. Free Trade zones though existed 2000 years ago; they have been famous forthe last fifty years. There has been enormous growth in establishments of free trade zones; one of the sole reason is Globalization. A consortium established on 2nd December 1971 known as the United Arab Emirates is federation of seven emirates namely: Abu Dhabi, Dubai, Sharjah, Ras Al Khaimah, Umm Al Quwain, Ajman and Fujairah. The three most populated Emirates are Abu Dhabi, Dubai and Sharjah; approximately 83 percent of the total population belongs to these emirates.

ECONOMY

Dubai has experienced a sudden explosion in the economy from the year 1970 and 1980 due to rising oil prices and adverse conditions in the oil market. The UAE economy has transformed from a subsistence economy to a highly prosperous economy in the world. The United Arab Emirates principally deals in Oil; one of the main products in UAE is petroleum. One of the uncivilized states in the world had one of the highest per capita incomes by the year 1985.The development in improving the capital quality and providing better social services, authorities in Dubai has invested immense wealth in these sectors. Abu Dhabi and Dubai are the leading 'centres for the production of Oil.As Dubai provides a market not just in its geographical limits but also is the passageway to its neighbouring countries. Dubai is also seeking a long term investment plan by various multinationals for the growth of its economy. The retail sector is expected to boom within the period of next five years due to developing economy and fast pace modernization.

PROCEDURE TO START A BUSINESS IN A FTZ

Determine the type of legal entity

Determine the type of legal entity your business would take up. In a free zone, you can set up one of the two types of companies:

  • Free Zone Limited Liability Company (FZ LLC) or Free Zone Company (FZ Co.)
  • Free Zone Establishment (FZE)

The differences lie in the number of shareholders and whether the shareholder is a natural person or a legal person. All free zones might not register both types of companies. You need to check with individual free zone authorities about the type of company they can register. Refer to the list of free zones and their authorities.

Dubai Multi Commodities Centre (DMCC) allows forming a limited liability company, which could be a newly formed entity with single or multiple shareholders or wholly-owned subsidiary of local or foreign company.

Branches

Existing local and foreign companies may set up a branch of their company in free zones.

Capital requirement

In Dubai Airport Free Zone, you can form an FZ Co. with a minimum share capital of AED 1000. Each

share should be in the denomination of AED 1000.

In DMCC, the minimum share capital for forming a free zone company is AED 50,000 per company and AED 10,000 per shareholder. For a company to be issued a General Trading Licence, it should have a minimum of AED 1 million share capital.

Choose a trade name

While you are deciding upon the type of legal entity your business should take, you should choose a trade name.

In most cases, you should check either with the respective free zone authority or the respective with the Department of Economic Development about the permitted trade names and whether the intended name has already been registered.

https://www.government.ae/en/information-and-services/business/starting-a-business-in-a-free-zone

TYPES OF FREE TRADE ZONES IN DUBAI

  1. THE JEBEL ALI FREE ZONE [JAFZ]

The Jebel Ali Free Zone (JAFZ) was established by decree No. 1 of 1985 and is located in the Emirate of Dubai. It is one of the largest man-made ports among other ports in the world. Over aperiod of years, the industries have grown in Dubai from every sector such as manufacture, trade and services, the trade is not limited to just middle-east counties, it has grown beyond it. There are more than 6000 companies established in Dubai which are engaged in the industry of art and culture.

Features

  • Dubai’s Port Authority provides an excellent service.
  • The JAFZ helps the businesses by establishing anon-site International Bank, Chamber of Commerce, Insurance Companies and the Consultancies.
  • IT also provides mortgaging of the company-owned properties (excluding the leased land)
  • The lease period allowed by this FTZ is of 50 years.
  • Types of activities include manufacturing, processing, assembling, packaging, import/ export, distribution, storage, services, etc.

Registration:

  • No minimum capital required if it is branch ofthe foreign company.
  • No minimum capital required if it’s a branch of a UAE company.
  • Minimum share capital is AED 500,000 for a Free Zone Company (FZCO).
  • Minimum share capital is AED 1,000,000 for a Free Zone Establishment (FZE).

Facility

Size

Cost in AED per annum

Land

Min: 5,000 sq. mts

20 - 80 per sq. mt

Pre-built factory & warehouse

313 - 556 sq. mts

120,000 - 220,000

with office space Office

Min. 50 sq. mts

1,800 - 2,200 per sq. mt

FZE Registration Fee one time AED 10,000

FZCO Registration Fee one time AED 15,000

Branch Registration fee one time AED 5,000

Types of Licenses

Cost in AED per annum

Industrial

5500

Trading

5500-12500

Service

5500

National Industrial

5500

General Trading

30,000

Taxation in JAFZ

Considering the intense trading activities in JAFZ which involve passing through various customs procedures, the Jebel Ali Free Zone Authority has enabled a 0% tax on the costs incurred by some these procedures in order to attract foreign investors. The Authority provides for 0% import and re-exports duties. Moreover, the local authorities have also enabled a 50-year exemption on the corporate tax, which can be renewed. Jafza has set the standard for incentives which also include no restriction on repatriation of capital, no restrictions on employment, 0% import and re-export duties, 0% personal income tax, zero currency restrictions, and no restrictions on hiring foreign employees.

http://jafza.ae/

  1. DUBAI CARS AND AUTOMOTIVE ZONE (DUCAMZ)

The main objective of DUCAMZ is to re-export the used cars in Asian and African markets, where the demand for used car still exist and continues to grow.

FEATURES

  • An excellent service provided by the Government.
  • Freight charges are highly competitive.
  • Ease of administration problems.
  • There are no restrictions on the import of automobiles.
  • No Import duties are one of the major advantages of DUCAMZ.
  • Easy clearance is one peculiarity of DUCAMZ from all the trade and local authorities.
  • The Support System is one of the best among other countries.
  • The leased contract for the use of business facilities can be entered by the parties up to 50 years.
  • Only car trading business or any company that deals with cars will be allowed.

REGISTRATION

  • No minimum capital is required for registering the branch of a UAE company -.
  • Minimum share capital is AED 100,000 for a Free Zone Company (FZCO)
  • Minimum share capital is AED 100,000 for a Free Zone Establishment (FZE).

Rental Facility

Size

Cost in AED per annum

Warehouse

Min 334 sq.mts

52,000 approx

Open Land

2,000 per sq.mt

20 - 30 per sq.mt

Types of Licenses

Cost in AED per annum

Trading

10,000

Service

10,00

Taxation in DUCAMZ

  • No personal income and corporate tax for a 50-years period of time
  • Full foreign ownership
  • Full repatriation of profits
  • No restrictions on the number of imported cars
  1. GOLD & DIAMOND PARK (GDP)

The Gold and Diamond Park is a free trade zone which is the principal location for manufacturing, trading and all associate activities with Gold and Diamond. The GDP is one of the FTZ where the customer’s request for specific designs, patterns and or any other customization that are required by the jewelers. The GDP provides 100% foreign ownership of entities.

FEATURES

  • The Government provides an excellent support service.
  • Not just with support service but it also provides retail shopping facility for the visitors.
  • 18 hrs security services.
  • Chiller systems free of cost.
  • Worker accommodation is also available but to a limited extent.
  • The facilities will be allowed to any person as a lease for the period of fifteen years.
  • The central gas distribution system
  • Manufacturing and crafting of gold and diamond jeweler, trading, designing, etc.such activities will be allowed.

REGISTRATION

  • No minimum capital required for a branch of a foreign company.
  • No minimum capital required for a branch of a UAE company.
  • Minimum share capital AED 100,000 for a Free Zone Company (FZCO).

Facility

Size

Cost in AED per annum

Retail outlets

No space restriction

Rate decided by the management

Pre-built manufacturing/office units

310 sq.ft -1200 sq.ft

100 - 200 per sq.ftapprox

Types of Licenses

Cost in AED per annum

Trading

5500

Manufacturing

5500

Taxation in GDP

  • Full foreign ownership
  • No income or corporate taxes
  • Full repatriation of profits
  1. TECHNOPARK (TP)

TP aims at developing a knowledge-based technology-centric sustainable business hub, which will not only support the country’s research and development needs in its core sectors but will also support the nation’s long term economic development and growth. TP is focused on Research, Development and Studies in the field of the country’s core economic sectors viz Energy including Oil and Gas, Desalination and Water Resource Management, Environmental Resource Management and hi-technology-driven knowledge-based industrial development. The Park’s R & D initiatives focus on nurturing business ideas or new technologies in respective areas and are also directed at improving the existing technologies in the country’s core economic sectors to enhance their production efficiencies.

FEATURES

  • 100% foreign ownership is allowed in Technopark.
  • Rules are made in this behalf for the purpose of repatriation of both capital and profits.
  • Uninterrupted and in abundance coupled with the cheap cost of energy supply.
  • Efficient transport and distribution facilities.
  • One-Stop Services available for technology.
  • TP is different from other Free Zones as it provides the best of both worlds i.e. TP is a local economic zone with additional privileges similar to those of the Free Zones.

REGISTRATION

  • Limited Liability Company (commercial/ industrial)
  • Branch of a Free Zone Establishment (FZE)
  • Branch of a Free Zone Company (FZCO)
  • Branch of a local and Foreign Company

Facility

Size

Cost in AED per annum

Office

Varies

Varies

Warehouse

Varies

Varies

Land

Min. 10,000 sq. mts

25-80 per sq. mt

Types of Licenses

Cost in AED per annum

Trading

5500

Service

5500

Industrial

5500

Taxation in Technopark

  • 0% percent corporate tax rate
  • No currency restrictions
  • Tax-free repatriation of profits
  • No restrictions on hiring foreign employees.
  1. DUBAI INTERNET CITY (DIC)

The Dubai Internet City (DIC) is a part of the Dubai Technology and Media Free Zone. It was formed under Law No. 1 of 2000 of the Emirate of Dubai.The DIC provides an excellent blend of knowledge resources and better quality of economic support, making it one of the best spaces for the development of Information and Communication technology.It is proved to have one of the best and the biggest infrastructures for ICT in the middle-east countries.

FEATURES

  • The state-of-the-art urban infrastructure is cost-competitive having flexible office space and many more.
  • It also has the largest commercial internet protocol telephony system in the world.
  • As an FTZ, it has stringent cyber regulation.
  • DIC has a content filled with rich network that companies can tap for resources, partnerships and ideas.
  • Easy and amicable procedure for registration of company and licensing.
  • Lease will be provided up to twenty years.
  • Type of company activities includes Software Development, Business Services, web based and e-Commerce, Consultancy, Education and Training, Sales and Marketing and Back Office Operations, etc.

REGISTRATION

  • No minimum capital is required for a branch of a foreign company
  • No minimum capital is required for a branch of a UAE company.
  • Minimum share capital is AED 50,000 & maximum depends on the authorities after review of the business plan for a Free Zone Limited Liability Company (FZ-LLC).

Facility

Size

Cost in AED per annum

Office

Min. 700 sq.ft

180 per sq.ft

Registration Fee one-time (FZ-LLC) AED 3,500

Registration Fee one-time (Branch) AED 3,500

Types of Licenses

Cost in AED per annum

Service

15,000

Taxation in DIC

No income and corporate taxes (50-year exemption), tax-free repatriation of profits, no customs duties on goods or services, no income tax for 50 years, 100 per cent foreign ownership. Apart from these, if any taxes are imposed to foreign companies acting as shareholders in Dubai companies, they can benefit from the double taxation agreements the UAE has signed with their home countries which provide for further tax advantages.

https://dic.ae/

  1. DUBAI MEDIA CITY (DMC)

The Dubai Media City (DMC) is a part of the Dubai Technology and Media Free Zone. It was formed under Law No. 1 of 2000 of the Emirates of Dubai. Dubai Media City is one of the emerging media hubs by the Dubai government for global media houses.The free trade zone established is equipped to provide the best infrastructure with financial stability for media houses to work or perform in compliance with global standards.

FEATURES

  • The DMC has one of the most advanced scalable IT networks.
  • DMC also provides Satellite Uplink / Downlink facilities.
  • Post-production studios and facilities.
  • Shared Business Centers.
  • Customer Care Center provides all the technical and support services.
  • Out of all general and specific rules, there are few which provide special facilities for professional freelancers.
  • 50-year lease contract for land and building.
  • Type of company activities includes broadcast services, music, video/audio publishing, production and post-production, advertising agencies, studios, etc.

REGISTRATION

  • No minimum capital required for a branch of a foreign company.
  • No minimum capital required for a branch of a UAE company.
  • Minimum share capital is AED 50,000 but the maximum share capital limit is on the complete discretion of authorities after analysis of the business plan for a Free Zone Limited Liability Company (FZ LLC).

Facility

Size

Cost in AED per annum

Commercial Offices

700 sq. ft.

200 per sq ft.

Business Centre

Varies

350-450 sq ft.

Registration Fee one-time (FZ LLC) AED 3,500

Registration Fee one-time (Branch) AED 3,500

Types of Licenses

Cost in AED per annum

Broadcasting Company

25,000-40,000

Publishing

20,000

Above the Line (one activity)

20,000

Below the Line (one activity)

15,000

Other Commercial

15,000

Freelancer Segment (one activity)

7500

Taxation in DMC

  • No personal or corporate tax for 50 years, an exemption that can be renewed
  • No tax on the repatriation of profits
  • No customs duty on the import of goods
  • No tax on the repatriation of capital.
  1. DUBAI STUDIO CITY (DSC)

Dubai Studio City (DCS) is a Free Zone established to provide facilities in setting up and developing an environment coupled with the advancedinfrastructure to foster the growth of the television, film and music industries in the region.The space provided by the DSC FTZ is spread across 22 million square feet;it includes production, post-production, broadcast, equipment rental, free commercial offices, business centre and satellite facilities among others. The institutes and education centres will help identify and groom future talent for the industry.

FEATURES

  • Industry Cluster Environment
  • DSC also provides an excellent advanced, scalable Telecoms and Broadband
  • Networking Opportunities
  • Tap into the creative and innovative energy in the zone for new ideas
  • DSC as a free trade zone helps the business by providing excellent networking opportunities in the Media Hub
  • DSC provides one of the excellent Commercial, residential, educational and recreational facilities
  • Type of company activities includes TV and radio broadcasting, broadcast management, filmed entertainment, film production / post-production, sound production, various production services, music & entertainment etc.

REGISTRATION

  • No minimum capital required for a branch of a foreign company.
  • No minimum capital required for a branch of a UAE company.
  • Minimum share capital AED 50,000 – AED 2,500,000 depending on the type of license for a Free Zone Limited Liability Company (FZ-LLC).

Facility

Size

Cost in AED per annum

Commercial Offices

Varies.

200 per sq ft. approx.

Registration Fee one-time (FZ LLC) AED 3,500

Registration Fee one-time (Branch) AED 3,500

Types of Licenses

Cost in AED per annum

TV& Radio station terrestrial/satellite)

25,000

TV& Radio network terrestrial/satellite

40,000

Broadcast Management

15,000

Taxation in DSC

  • Guaranteed 50-year exemption from personal
  • Income and corporate taxes
  • No customs duty
  • Comparatively lower operating costs
  • 100% business ownership
  1. DUBAI KNOWLEDGE VILLAGE (DKV)

Knowledge Village was formed under Law No. 1 of 2000 of the Emirate of Dubai. DKV is established to strengthen the position of the Dubai Technology and Media Free Zone as a center of excellence for learning and promoting innovation.This FTZ was established for the purpose of supplementing the other two FTZ.

FEATURES

  • Government support services.
  • Conference centers.
  • Dormitory.
  • Multimedia library and other common facilities.
  • The facilities will be provided by the way of lease for 50 years.
  • Type of company activities includes IT and Media Corporate Schools, Executive Education Centre, HR Development Centre, Professional Training Centers, Vocational Training Centers, Assessment Centre, Testing Centre, Linguistic Institute, Innovation Centre, Academic Service Provider, School, e-Learning Provider, etc.

REGISTRATION

  • No minimum capital required for a branch of a foreign company.
  • No minimum capital required for a branch of a UAE company.
  • Minimum share capital varies from AED 50,000 – AED 2,500,000 depending on the type of license for a Free Zone Limited Liability Company (FZ-LLC) –

Facility

Size

Cost in AED per annum

Open Office (furnished)

No Space Restriction

15,000 per desk (up to 6 months)

Closed Offices/ Exexc Temp Offices

Varies

32,000-35,000 (up to 6 months)

Commercial Office (unfurnished)

No Space Limit

200 per sq ft.

Retail Offices

Various Sizes

200 per sq. ft.

Registration Fee one-time (FZ LLC) AED 3,500

Registration Fee one-time (Branch) AED 3,500

Types of Licenses

Cost in AED per annum

University segment

50,000-1,00,000

School Segment

3,00,000

Boarding School

1,00,000

General Segment

15,000

FreeLancer

7,500

Taxation in DKV

  • Guaranteed 50-year exemption from personal
  • Income and corporate taxes
  • No customs duty
  • No taxes on the repatriation of profits and capital
  1. DUBAI INTERNATIONAL ACADEMIC CITY (DIAC)

Dubai Knowledge Village (DKV) announced the launch of Dubai International Academic City (DIAC), the World’s only Free Zone dedicated to international higher education. It was basically established for the purpose of the educational institution from Dubai Knowledge village to transfer to DIAC.Spaces of around 12 million square meters provide an intellectually viable environment and also helps in providing the global opportunities to students in DIAC, seven universities have already been set up here for promoting education. The Free Trade Zone will only be for the institution of international nature or status while other public colleges will be kept or established in a separate location providing a demarcation between international and other public colleges.

DIAC has the benefit for any person establishing an institution to repatriate 100% profitsalso he will be allowed to have invested full capital having 100% ownership as a full tax exemption.

FEATURES

  • Government support services.
  • Wellness centers, dining facilities and entertainment venues including movie theatres, gaming centers etc.
  • Student Accommodation
  • Sports centers
  • Multimedia library and other common facilities.
  • Type of company activities includes Universities, colleges, sports facility management, library management, accommodation service provider, academic support services, etc.

REGISTRATION

  • No minimum capital required for a branch of a foreign company.
  • No minimum capital required for a branch of a UAE company.
  • Minimum share capital varies and depends on the authorities after a review of the business plan for a Free Zone Limited Liability Company (FZ-LLC).

Facility

Size

Cost in AED per annum

Office

18,000-20,000 sq. ft.

145-180 per sq. ft.

Land

2,50,000 sq. ft.

20-30 per sq.ft

Registration Fee one-time (FZ LLC) AED 3,500

Registration Fee one-time (Branch) AED 3,500

Types of Licenses

Cost in AED per annum

University segment

50,000-1,00,000

Branch University Segment

15,000-1,00,000

Taxation in DIAC

  • 100% tax exemption
  • Full foreign ownership
  • Full repatriation of capital and profits
  • Exemption from customs duty for goods and services
  1. DUBAI OUTSOURCE ZONE (DOZ)

Dubai Outsource Zone is the World’s first Free Zone dedicated to the outsourcing industry. Dubai Outsource Zone provides one of the best infrastructures for BPO KPO, LPO or any other outsourcing company to establish a regional and global hub. DOZ is one of the best places among other FTZ for any organization providing mid to high end IT services for outsourcing companies.These facilities form part of a plug-and-play infrastructure which helps offshore service providers start operations quickly with minimal upfront investments.

FEATURES

  • DOZ provides for 100 percent exemption from taxes.
  • DOZ provides for 100 percent repatriation of capital and profits.
  • Host of support services to eliminate problems faced by outsourcing companies and to reduce operational hassles for outsourcing service providers. They include Speedy Incorporation and Trade Licensing, Hospitality Services and Event Management Services, etc.
  • One of the most important features of DOZ is the provision of facilities to plug-and-play infrastructure which helps offshore service providers to start operations with minimal upfront investment.

REGISTRATION

  • No minimum capital required for a branch of a foreign company.
  • No minimum capital required for a branch of a UAE company.
  • Minimum share capital AED 300,000 for a Free Zone Limited Liability Company (FZ LLC).

Facility

Size

Cost in AED per annum

Office

Varies 1,500 sq. ft.

160-200 per sq. ft.

Registration Fee one time (FZ LLC) AED 3,500

Registration Fee one time (Branch) AED 3,500

Types of Licenses

Cost in AED per annum

General segment

15,000

Taxation in DOZ

From a taxation point of view, companies in Dubai Outsource zone are not applied any import or export duties. Moreover, all profits earned within the Outsource Zone can be fully repatriated. Additionally DOZ has a 100% Tax-Free Environment for 50 years,100% foreign ownership,No Restriction on Profit or Capital.

  1. ENERGY AND ENVIRONMENT PARK (ENPARK)

Enpark is a special destination for clean energy and environmental technology companies to operate and a fully-integrated knowledge community that includes programs, services, partnerships and amenities to support the success of environment companies and their employees.

FEATURES

  • No custom duty.
  • Full currency convertibility.
  • Hassle-free company laws and legal framework.

REGISTRATION

  • No minimum capital is required for a branch of a foreign company.
  • No minimum capital is required for a branch of a UAE company.
  • Minimum share capital is AED 300,000 for a Free Zone Limited Liability Company (FZ LLC).

Facility

Size

Cost in AED per annum

Land

Varies

Varies

Executive Office

Varies

Varies

Registration Fee one time (FZ LLC) AED 3,500

Registration Fee one time (Branch) AED 3,500

Types of Licenses

Cost in AED per annum

Varies

15,000

Taxation in ENPARK

  • 100% tax free.
  • 100% foreign ownership.
  • No corporate tax.
  • No income tax for 50 years.
  • Full repatriation of capital and profits.
  • No currency restrictions
  1. DUBAI BIOTECHNOLOGY AND RESEARCH PARK (DuBiotech)

DUBIOTECH established and formed a part of Dubai Technology and Media Free Zone and it is going to be the world’s first Free Trade zone in Bio-diversity industry. Discoveries and inventions can be patented through the Industrial Property Directorate at the Ministry of Finance and Industry.

An applicant has to apply for patent registration in a procedure established by law after the authority is of the best opinion about the application they can forward the same and approve it granting a patent to the applicant.Any person applying for patent for his/her innovation can also apply to GCC patent office of Saudi Arabia, which provides GCC-protection; UAE is a party to the Patent Cooperation Treaty (PCT).The privilege of being a PCT state is that it helps for a centralized form of registration; it empowers any other state to be designated as the patent filling state.As authorities have been established the rules and regulation regarding IPR will be strictly administered and infringement will be dealt according to law.

The park will promote and propagate inclusive of the following two initiatives:

  • A cluster of Industry.
  • Foundation for Research and Innovation (FRI).

FEATURES

  • Infrastructure state promoting art.
  • Any promoter willing to set up his/her own building in FTZ is allowed and separate space will be available for such construction.
  • A well-equipped production/ manufacturing, trading other space are available for carrying out business.
  • A separate space for the purpose of conducting research will be provided.
  • Common facilities include a library, video-conferencing, auditorium, theatre, meeting rooms, etc.
  • A full back up of electricity for the business house has been set-up.
  • Waste management and effluent treatment including the disposal of chemical, biological and hazardous materials.

REGISTRATION

  • No minimum capital required for a branch of a foreign company.
  • No minimum capital required for a branch of a UAE company.
  • Minimum share capital varies depending on the authorities after review of the business plan for a Free Zone Limited Liability Company (FZ LLC).

Facility

Size

Cost in AED per annum

Land (lease hold only)

Min. 38,000 sq. ft. onwards

Varies

Executive Office

Varies

450 per sq. ft.

Laboratory Space

Varies

Varies

Registration Fee one time (FZ LLC) AED 3,500

Registration Fee one time (Branch) AED 3,500

Types of Licenses

Cost in AED per annum

Production

25,000

Manufacturing

25,000

Others

15,000


Taxation in DuBiotech

Companies operating in DuBiotech will not pay any corporate tax. Only branches of foreign companies established in this free zone will be applied a 20% tax on their corporate incomes. Additionally other tax incentives include; free repatriation of profits, no taxes on the operations completed here, various customs exemptions on import and export activities.

Even if companies will not be imposed with corporate tax, companies in Dubai Biotechnology & Research Park must register with the tax authorities and file tax returns which, in the case of foreign shareholders, must also be filed with the tax authorities in their home countries with the purpose of being granted tax deductions or reductions.

  1. DUBAI MULTI COMMODITIES CENTRE (DMCC)

The Dubai Multi Commodities Centre (DMCC) has been created as a strategic goal of the Dubai Government to establish a commodity market place in Dubai. The DMCC was launched on April 18th 2002 by a decree from the Government of Dubai. The DMCC offers a unique opportunity for participants in a wide range of metals and commodities industries. It provides facilities that bring together the gold trade, the diamond trade (housing a Diamond Exchange), and trading in other selected commodities. DMCC has also entered into a joint venture between MCX (Multi Commodity Exchange of India and FTIL (Financial Technologies India Ltd) and has formed the Dubai Gold and commodities exchange (DGCX).

FEATURES

  • Trading will be mainly of commodities including Gold and precious metals, Diamond and other precious stones.
  • A person owning the business will have free - hold of the premises.
  • Exchange of Diamond and other precious stones.

REGISTRATION

  • No minimum capital required for a branch of a foreign company.
  • Minimum share capital is AED 200,000 for a Free Zone Company (DMCCO).

Facility

Size

Cost in AED per annum

Office in the commercial tower for purchase

Flexible

1200-1800 per sq. ft.

Office in Business Avenue

22sq. m-110 sq. m

180 per sq. ft.

Laboratory Space

Varies

Varies

Registration Fee one time AED 5,010

Types of Licenses

Cost in AED per annum

Trading

8000 to 25,000

Depends on units or area leased)

Manufacturing

15,010

Service

15,010

Taxation in DMCC

Taxation in DMCC is extended to 0% corporate and personal tax for 50 years, full capital repatriation and full foreign ownership.

  1. JUMEIRAH LAKES TOWERS (JLT)

Jumeirah Lakes Towers (JLT) is a dynamic waterfront community and is one of the designated areas within the Dubai Multi Commodities Centre (DMCC). The DMCC Authority (DMCCA) will be the licensing authority for businesses operating in the Jumeirah Lakes Towers. Businesses in JLT therefore, will benefit from a Free Zone status, making JLT the first mixed-use Free Zone Freehold development in Dubai. The DMCCA offers investors 100% foreign ownership of businesses established in JLT. DMCCA has the separate operating regulations that governthe Core Companies in DMCC as compared to Non-Core Companies in JLT. Non-Core Companies established in the JLT and licensed approved pursuant to the operating regulations that do not allow businessmen to trade in commodities or other activities that are not licensed through DMCC.Companies are strictly forbidden/ or only allowed to/ from carrying out activities other than those appearing on their license

REGISTRATION

  • No minimum capital is required for a branch of a foreign company.
  • Minimum share capital is AED 300,000 for a Jumeirah Lake Tower entity (JLT).

Facility

Size

Cost in AED per annum

Office

Flexible

Fixed by Individual

Registration Fee one time AED 10,010

Types of Licenses

Cost in AED per annum

Trading / Service

20,010

Taxation in JLT

Taxation in JLT is extended to 0% corporate and personal tax for 50 years, full capital repatriation and 100% foreign ownership.

  1. DUBAI FLOWER CITY [DFC]

Strategically located within the boundaries of Dubai International Airport, Dubai Flower Centre (DFC) is a new hub of growth for the floriculture industry in the 21st century. With the explosive growth in the global trade of flowers and perishables, there is an increasing demand for innovative logistics and commercial solutions to enable the industry to reduce transit times which improve the quality and grow profits. To add value to the chain, DFC will operate as a Free Zone, where international traders, logistic companies and service providers can establish operations in an “offshore” environment. Through the DFC Free Zone, exporters, importers and wholesalers can establish trading companies to transact business in a tax, duty and exchange-control-free environment.

FEATURES

  • DFC provides one of the excellent logistics services in the world.
  • Providing the best quality of communication to and from major global trading points.
  • Providing the best point of import and distribution services.
  • A wider range of innovation.
  • An excellent cool chain management.
  • Cost-effective value addition by the help of facilities provided in FTZ.
  • Supplementing efficient commercial transactions.
  • Trans-ship facilities with amicable consolidation.
  • Trained personnel for providing perishable activities.
  • Facilitating flower treatment.

REGISTRATION

  • No minimum capital required for a branch of a foreign company.
  • No minimum capital required for a branch of a UAE company.
  • Minimum share capital is AED 500,000 for a Free Zone Company (FZCO).
  • Minimum share capital is AED 1,000,000 for a Free Zone Establishment (FZE).

Facility

Size

Cost in AED per annum

Office suites

Varies

500-2500 sq. mt.approx

General Office Lease

Varies

500-2000 sq. mt.approx

Business Centre offices

Per desk unit basis

Depends on usage.

Warehouse

Min. 350-850 sq. mts.

Varies

Registration Fee yet to be finalized

Types of Licenses

Cost in AED per annum

Trading

10,000

Industrial

10,000

Service

10,000

Taxation in DFC

  • 100% foreign ownership of the capital of the company;
  • No restrictions on repatriation of the investment assets and gained profits;
  • No corporate taxation;
  • Tax holidays for all the types of state fees for up to 15 years;
  • No state foreign exchange control.
  1. DUBAI AIRPORT FREE ZONE (DAFZ)

Dubai Airport Free Zone (DAFZ) was established under Law No.2 of 1996 and its amendment No.2 of 2000. It is wholly owned by the Government of Dubai. DAFZA is the only airport-oriented Free Zone in Dubai, and it’s located within the boundary of Dubai International Airport. DAFZA is an ideal location for high-tech/IT products, luxury items, jeweler, light industry and activities related to the aviation industry.

FEATURES

  • Located in the proximity of Dubai International Airport.
  • Best and easy clearance for cargos i.e. 8-18 hours.
  • Establishment of International Freight Forwarders and Logistics companies at DAFZ facilitating transport services.
  • Online customer care services.
  • Land with easy access to airport apron.
  • Activities such as manufacturing, assembling, packaging the imported items, export distribution; storage and all other services required are included in DAFZA.

REGISTRATION

  • No minimum capital required for a branch of a foreign company.
  • No minimum capital required for a branch of a UAE company.
  • Minimum share capital is AED 500,000 for a Free Zone Company (FZC).
  • Minimum share capital is AED 1,000,000 for Free Zone Establishment (FZE).

Facility

Size

Cost in AED per annum

Land

Min. 2500 sqmts.

300 per sq. mts.

Light Industrial units

350 sq. m.

800per sq. m.

Office

50 sq. m.

1800-2200 per sq. m.

FZE Registration Fee one time AED 10,000

FZCO Registration Fee one time AED 15,000

Types of Licenses

Cost in AED per annum

Trading

10,000

Industrial

10,000

Service

10,000

Taxation in DAFZ

  • A 0% tax on corporate incomes;
  • A 0% tax on other incomes;
  • A 0% on imports and exports;
  • Dubai Airport Free Zone Authority does not impose any restrictions on the repatriation of capital.
  1. DUBAI HEALTH CARE CITY (DHCC)

DHCC aspires to provide excellent medical care services in selected disciplines that are relevant to the health problems facing patients in the region. The ‘core’ of the healthcare cluster economy is a University Medical Complex; consisting of a University Specialty Hospital, a Post-Graduate Medical School and Nursing School, and a Life Science Research Center.

FEATURES

  • Cost-effective operating system.
  • State for providing excellent medical facilities.
  • Synergized health care community.
  • World-class medical care.
  • All service center including healthcare mall.
  • Lease agreement or freehold basis is also available.
  • The types of activities allowed in DHCC are wellness centers, nutrition centers, rehabilitation centers, health resorts and spa, health farm, research centers, pharmaceutical companies, private hospital and clinics, nursing school, science specialists, university complexes, telehealth and e-enabled services, etc.

REGISTRATION

  • No minimum capital required for a branch of a foreign company.
  • No minimum capital required for a branch of a UAE company.
  • Share capital varies depending on the type of project for a Free Zone Company (FZ LLC).
    • Minimum AED 300,000 for clinical establishment.
    • Minimum AED.1, 00,000 for non-clinical establishment.
    • Hospitals - discretionary.

Facility

Size

Cost in AED per annum

Office / clinics

Varies

30-250 per sq. ft.

Retail Units

Varies

275-400 per sq. ft. approx.

Land

Varies

Varies.

Registration Fee (FZ-LLC) AED 3500

Types of Licenses

Cost in AED per annum

Commercial License

20,000

Hospitals

40,000-50,000

Profession License

Varies

Taxation in DHCC

  • Corporate tax exemptions (50 years);
  • Tax-free repatriation of profits;
  • Tax-exemption on custom duties.
  1. DUBAI SILICON OASIS (DSO)

Dubai Silicon Oasis is an exciting global collaborative initiative, combining decisive forces that will shape the semiconductor industry under the leadership of Dubai Airport Free Zone Authority. The Dubai Silicon Incubation Centre is an excellent centre for providing the best faculties regarding broadband and wireless for the development and commercialization of Intellectual Property Rights.

FEATURES

  • A spacious campus area and exquisite location with the layout.
  • Plug-and-play facilities.
  • World-class support facilities for IC companies in DSO.
  • Integration of suppliers and service provider facilitating in business process and making trade cost-effective.
  • Supporting communities with facilities for working in shared space.
  • Type of company activities would include CAD/CAE companies, design companies, packaging companies, testing companies, etc.

REGISTRATION

  • Any establishment of branch office by the Foreign Company.
  • Any establishment of branch office by the UAE Company.
  • Minimum share capital is AED 500,000 for a Free Zone Company (FZCO).
  • Minimum share capital is AED 1,000,000 for a Free Zone Establishment (FZE).

Facility

Size

Cost in AED per annum

Office

Min. 50 sqmts.

2300 per sq. mt.

Warehouse

Min. 366 sq. mts.

600 per sq. mts.

Land Min

5000 sq. mts.

150-250 Per sq. mts.approx

FZE Registration Fee one time AED 10,000

FZCO Registration Fee one time AED 15,000

Types of Licenses

Cost in AED per annum

Manufacturing

15,000

Trading

15,000

Service

15,000

Taxation in DSO

  • No taxes on import and export procedures;
  • No tax on corporate profits;
  • No tax on income;
  • No tax on the repatriation of profits.
  1. DUBAI INTERNATIONAL FINANCIAL CENTRE ( DIFC)

The DIFC is an “onshore” financial centre, offering a platform of choice for leading financial institutions and service providers looking to do business in the region. It has been established as part of the goal to the position. Dubai as a recognised hub for institutional finance and the regional gateway for capital and investmentaims to play a pivotal role in meeting the growing financial needs and requirements of the region while strengthening links between the financial markets of Europe, the Far East and the Americas.

The DIFC concept has evolved as a means of:

  • Providing depth to the regional financial markets by broadening the range of traditional methods of financing currently provided by the regional banks. Type of License Cost in AED per annum Manufacturing 15,000 Trading 15,000 Service 15,000 Facility Size Cost in AED per annum Office Min 50 sq.mts 2,300 per sq.mt Warehouse Min 366 sq.mts 600 per sq.mts Land Min 5,000 sq.mts 150 - 250 sq.mtsapprox FZE Registration Fee one time AED 10,000 FZCO Registration Fee one time AED 15,000 54 PKF - Free Zones in the UAE - Free Zones in Dubai
  • Attracting liquidity back into investment opportunities within the region, thereby contributing to its economic growth.
  • Facilitating planned privatizations in the region and enabling initial public offerings of privately-owned companies, thus providing impetus to the programmed of deregulation and market liberalization throughout the region.
  • Contributing to the development of regional stock markets which, in turn, will contribute towards broadening the capital and ownership base of private sector companies; and, promoting the growth of Islamic finance and the development of the region’s reinsurance sector.

Legal Restrictions on Authorized Firms in DIFC

  • DIFC entities may not offer any products or services to the retail market
  • Insurance activities in the UAE are restricted to re-insurance
  • UAE federal laws regarding the Criminalization of Money Laundering apply, while federal civil and commercial laws do not apply.
  • DIFC entities may not take deposits, deal and offer any products or services in UAE dirham
  • All DIFC licensed entities must be resident in the DIFC. If no space is available in DIFC, the entity may apply to be resident in Dubai until such time space is available.

While the DFSA permits a wide range of financial services to be carried out from within the DIFC, some restrictions apply. Authorized Firms are not permitted to undertake the following activities:

  • Dealing with an individual client with less than US$ 1 million in liquid assets.
  • Dealing with an institutional client with share capital or net assets less than US$5 million.
  • Accepting deposits from the United Arab Emirates market.
  • Conducting insurance business with individuals.
  • Providing money services unless it is connected with another financial service for which the firm is authorized.

FEATURES

  • Internationally accepted laws and regulatory processes.
  • A world-class, independent, regulatory agency working alongside other financial regulatory agencies located in major global jurisdictions.
  • A wholly transparent operating environment, complying with global best practices.
  • A dollar-denominated environment.
  • An international stock exchange with primary and secondary listings of debt and equity instruments.
  • A variety of legal vehicles that may be established with capital structuring flexibility.
  • The DIFC focuses on several sectors of financial activity like the Banking Services (Investment Banking, Corporate Banking and Private Banking); Capital Markets (Equity, Debt Instruments, Derivatives and Commodity Trading); Asset Management and Fund Registration; Insurance and Re-insurance; Islamic Finance; Business Processing Operations and Ancillary Services.

REGISTRATION

  • Company with Limited Liability: - TheseCompanies are incorporated under Law No. 2 of 2004 – Companies Law.
  • Limited Liability Partnership: - Limited Liability Partnerships are formed under Law No. 5 of 2004 – Limited Liability Partnership Law. By signing and filing with the Registrar an application for incorporation, any two or more persons may apply for the incorporation of a Limited Liability Partnership, in accordance with the terms of the Limited Liability Partnership Agreement.
  • General Partnership: General Partnerships are formed under Law No. 11 of 2004 – General Partnership Law. Under the General Partnership Law, all partners are jointly, and severally liable without limit for the debts and obligations of the partnership.
  • Branch of a Foreign Entity: Branches of foreign companies, limited liability partnerships and general partnerships may be established within the DIFC as recognized entities.

Any person can set up his/ her entity in either of the following categories:

  • Firms who have received permission.
  • Market institution with prior approval.
  • Any other service provider ancillary to other firms.

Facility

Size

Cost in AED per annum

Office

Varies

Varies

Types of Licenses

Cost in AED per annum

Varies

Varies


Taxation in DIFC

  • No income or corporate tax for a period of 50 years;
  • No repatriation taxes;
  • No import and export duties.
  1. DUBAI LOGISTICS CITY (DLC)

Dubai Logistics City (DLC) is an integrated logistics platform, with all transport modes, logistics and value-added services, including manufacturing and light assembly. DWC is the world’s first truly integrated logistics platform, with all transport modes, logistics and value-added services, including manufacturing and assembly, in a single bonded and Free Zone environment. Hence DLC Free Zone is adjacent to the upcoming Jebel Ali International Airport and adjacent to the Jebel Ali Port and Free Zone.

DLC can be used as:

  • A global supply chain hub for sea-air or air-air transport combinations
  • A global hub for value-adding logistics operations such as merge-in-transit, customization, postponement, packaging and labeling, final assembly.
  • A distribution hub for the greater region while reducing the number of required warehouses and improving customer service.
  • A platform to regain control of the distribution channel, e.g. by the introduction of direct sales.

FEATURES

  • Air cargo terminals: Air cargo terminal provides terminal facilities for the business establishment to carry out trading of goods in case of cross border trade.
  • Land plots for industry or contract logistics: With best and flexible plot arrangements to support industry or contractor involved in providing logistics facilities and wide facility for the business involved in warehousing operations.
  • Integrator facilities: A free trade zone or single custom bonded warehouse provides integrator facilities that provide all facilities such as logistics services, transport modes and other supply facilities helping business in optimizing and focusing more on core activities.

REGISTRATION

  • Any establishment of branch office by foreign / UAE company.
  • Minimum share capital is AED 300,000 fora Dubai World Central Limited Liability Company (DWC LLC).
  • Capital investible is according to the establishment.

Facility

Size

Cost in AED per annum

Office

Varies

Not yet Finalized

Warehouse

Varies

Not yet Finalized

Land Min

10,000 sq. mts.

Not yet Finalized

DWC LLC Registration Fee one time AED 10,000

Types of Licenses

Cost in AED per annum

Trading

5,500

Service

5,500


Taxation in DLC

  • 100% ownership
  • No taxation
  • 100% repatriation of capital and profits
  • flexible commercial lease terms
  1. DUBAI MARITIME CITY (DMC)

The main objective with which Dubai Maritime City was established is to develop the world’s first cluster of the shipping industry. DMC will be helping the shipping companies in developing industry for the repairs and other sea vessels developing the waterfront in Dubai. DMC will be able to provide as a facilitator to seven major industries such as maritime management, maritime services, maritime retail and recreation, maritime education and research, ship repair and maintenance, yacht repair and maintenance.

FEATURES

  • Industry Cluster Environment.
  • An excellent support services provided by the Government.
  • Exploring and exploiting opportunities in innovative and creative energy in the Free Trade Zone.
  • High quality network and excellent opportunities for growth in networking.
  • All facilities are provided by way of commercial, residential, electronic and other re-creational as required.

REGISTRATION

  • No minimum capital required for a branch of a foreign company.
  • No minimum capital required for a branch of a UAE company.
  • Minimum share capital is AED 500,000 for a Free Zone Company (FZC).
  • Minimum share capital is AED 1,000,000 for a Free Zone Establishment (FZE).

Facility

Size

Cost in AED per annum

Land

Varies

Not yet Finalized

Light Industrial Units

varies

Not yet Finalized

Office

Varies

Not yet Finalized

FZE Registration Fee one time AED 10,000

FZCO Registration Fee one time AED 15,000

Types of Licenses

Cost in AED per annum

Trading

5,500

Service

5,500

Industrial

5,500


Taxation in DMC

  • No income or corporate taxes to companies
  • Full foreign ownership,
  • Can freely repatriate any profit or capital
  • No customs duties for companies

CONCLUSION

Dubai is a budding hotbed for doing business. This statement stands true for more than one reason. It includes provisions such as tax exemption, a major difference between other countries and Dubai is that; while countries around the world are revamping their tax laws, Dubai is offering a tax-exempted environment, where you can invest your money and rope in maximum benefits. Secondly, contrary to the LLC clause where your stake as a foreigner is always limited, under Free zones, you get a 100% ownership of the business.

While other business settings require you have a local promoter, to run a Dubai Free Zones, a single individual can set up your business. You are eligible for additional perks of 25 years of lease options, having assembling and production facilities and warehouse facilities. Additionally, if you are looking for Dubai business setup, an advantage you get is that you are not restricted to carry out just one business-related activity, you can carry out more than one business-related activity.

INTRODUCTION

Many Indian Companies are now expanding their operations in different countries of the world. This process of cross-border expansion is termed as Globalization. As Singapore is situated in the centre of Southeast Asia,it gives privilege to a corporation for doing business in a country that is centrally located. Incorporating a company in Singapore helps businessmen around the worldto get access to a market of over 2.8 billion people. Singapore being a country nearthe sea, it has a status of International Maritime Center. It is a country which has the second biggest container port in the world.  Considering the strategic location and good access to transportation, it also has an excellent and structured tax system. Singapore with the parliamentary system has a very stable political environment; its legal system is based on the English Common Law that founds a similar provision when it comes to the contracts and other related laws.

There’s also an advantage for businessmen when it comes tothe incorporation of the company; it is effortless in Singapore to open a business. Singapore has a prosperous economy; it has ones of the lowest unemploymentrates in the world. Been a country with all these peculiarities, it is an ideal hub for business expansion.Singapore is ranked 7th on the list of the least corrupted country among other countries. With tremendous purchasing power parity, it has been positioned at 3rd in the list of highest per capita GDP in the world. Due to its highly stable political environment and feasible investment policies, Singapore is one of the favoured locations for Foreign Direct Investment.

In the year 2014 Singaporean economy has been ranked 2nd in overall Scientific American Biotechnology with featuring Biopolis. The economy has boomed due to the increase in the banking sector in Singapore resulting in smooth facilitation of finance at the same time providing the stable in the financial industry in the country. The pharmaceutical industry now stands for 8% of the country’s manufacturing production providing investment opportunities in the sector. The oil industry in Singapore nearly rounds to 5% of the country growth, making it one of the three leading oil refining centers in the world. With most of the land in Singapore is arable the economy is more dependent on Agro technology resulting in additional opportunities to set up an establishment in the field of agriculture sector or providing  more opportunities for investing funds in Agro technology park.

In promoting the ease of doing business in Singapore, Singapore holds double tax agreements (DTAs) with several countries.A double taxation Avoidance Agreement is a treaty entered between two countries for reducing the burden of paying double tax on the same income. It generally takes place between two countries where a person is earning income in one country and repatriating it in some other country. To avoid the confusion between the two countries on who will be the actual assessor of the person’s income this treaty is formulated. Due to Globalization business houses are going for expansion beyond the borders, it plays a significant role in deciding the net profit and net tax payable. Below is the list of countries that are a signatory with Singapore.

https://www.iras.gov.sg/irashome/Quick-Links/International-Tax/List-of-DTAs--limited-treaties-and-EOI-arrangements/

INVESTMENT LAWS

Singapore is a country with an open economic policy which is a favoured location for foreign investments. There are no specific laws that govern foreign investments in Singapore; foreign investments are governed by the common laws of the country, i.e. the common law of contract or Companies Act of Singapore. There is no distinguished treatment under the law for foreign companies. Economic Development Board is a statutory body established under the Economic Development Board Act, 1961. The Economic Development Board regulates all the investment in Singapore. The Act specifically states that section 6 of the Act defines the functions of attracting both local and foreign investments.

https://www.edb.gov.sg/

TYPES OF ENTITIES

Any person willing to incorporate a company or establish any business entity can incorporate/establish with the compliance of procedure. Following is the overview of various types of business entities that are available for incorporation:

  1. Limited Liability Company

This is a type of company which can be incorporated after registering such company with Accounting and Corporate Regulatory Authority. Limited Liability Company is an artificial person having a separate existence after its registration. LLC has its ownership on the assets and liabilities of the company no person though being a promoter of the company has no claim on the assets of the company nor will they share the liabilities of the company personally. LLC being an artificial person, can sue or be sued in its own for its own act. The liability of every member of the company is limited to the contribution towards capital invested by him/her.

  1. Private Limited Company

In the Private Limited Company, personal assets are different from business assets. Every shareholder is responsible for his share of the total capital. Private Ltd Companies need to maintain the records of financial transactions, board meetings, and annual reports and so on.

A Private Ltd company consists of a shareholder, wherein the total capital of an entity is made of shares. The shares can be sold or transferred to another individual who then becomes one of the owners of the company. In private limited company,the limit on the member is up to 50 members.

  1. Exempted Private Limited Company

An exempted private limited company is a private limited company which exempted from the condition of filling of the annual account. Any company to qualify for such exemption EPC needs to comply with the following requirements:

  1. Annual revenue is less than SGD 10 million.
  2. Total asset value should not be more than SGD 10 million.
  3. The company should not have more than 50 employees.
  1. Public Company

A Company is a legal entity formed by a group of individuals to engage in and operate a commercial business or an industrial enterprise. A company includes not just employees and employers but also includes shareholders, partners andsuch other decision-makers. As the exponential growth in the corporate market has taken place, there’s a growing number of people’s involvement, for the wealth maximization. A company has to be registered in order to give a legal identity / existence in order to receive the full benefits provided by the legislation on this behalf. Every company that is formed as a public limited company under the Companies Act is inclusive of limited liability feature that states that a person who invests in the company via shares should have his/her liability limited to the outstanding value of the share price. Liability of the company will not be borne by the owner of the share.

  1. Company Limited by Share:

The capital of the company has been divided in no. of shares;a share is a single unit of the share capital. It is an instrument through which a person can invest money towards the capital of the company. So a company limited by share means the company where the members have its liability limited up to the extent of funds invested by him/her pursuant to share agreement.

  1. Company Limited by Guarantee:

Any company formed and registered with a mutual agreement of an amount is known as a guarantee. The company which is limited by guarantee is a company consisting limited liability of its members by the memorandum to such amount as the members may respectively undertake to contribute towards the assets of the company in the event of its winding-up.

  1. Sole Proprietorship

A company registered in the name of a single person is called Sole Proprietorship. That sole person is wholly responsible for the welfare of the entire business. The owner funds the company takes the profits and bears the losses. This is the most popular business model in Singapore though sole proprietorship does not have a separate legal entity, it has registered the business with Accounting and Corporate Regularity Authority.

  1. Partnership

Partnership business entities are similar to a sole proprietorship. The main difference between partnership and sole proprietorship is that two or more members are necessary to form a partnership. The responsibilities, roles and the share of the partners are always defined in an executed partnership deed.

The ratio of the profit-sharing is defined by the partners in the partnership deed. In the case of losses, each of the partners is responsible personally. Personal assets of partners can be used to compensate the losses incurred if any as decided by the partners.

  1. Limited Liability Partnership

A limited Liability Partnership firm is different from the partnership firm as the personal assets are different from the business assets. In case the business incurs damages, the personal assets of partners are not at risk as it is defined and capped at the maximum liability of every partner.

As compared to Sole Proprietorship and Partnership, Limited Liability Companies always has good credibility among the investors. The primary reason includes the maintenance of incorporation, tax and financial records.

  1. Representative Office

A Representative Office is an extension of the parent company to carry out market research and other market roadshow activities that will provide an insight into Singaporean market that will help the promoters for making a wise investment decision. Representative Office is not allowed to undertake any commercial activity and cannot earn any revenue.

  1. Branch Office

A branch office is basically an extension of the registered business working under the control of the company. A branch office though been an extension of the company has no separate legal entity. Any positive or negative effect on the income of the company shall be attributed to the parent company. The set-up of branch offices is allowed to conduct all such activities mentioned in law on behalf of Company such as signing the contracts or any other documents validating the transaction, etc. A Branch office provides with an advantage of immediate working as per law. After considering the various positions, it is feasible for the company to start its business immediately. The advantage of starting the branch offices is that it is not necessary for them to submit its audited financial statements for any purpose. As the Branch Office is still a business establishment, it has to be registered with ACRA. A branch office of any foreign company has to file audited accounts annually with ACRA.

  1. Subsidiary Company

Any company incorporated as a private limited company under the holding company conducting its performance in a different sector or same sector is known as the subsidiary company. Laws governing the corporate and other matters relevant to companies, provide the investment limits up to 100% foreign money in a company.
With numerous tax advantages and other benefits, it became a necessary measure to incorporate the subsidiary company. Subsidiary Company is liable to pay local corporate tax. The Subsidiary Company should file its own audited statement annually with ACRA.

TIME TAKEN TO REGISTER AN ENTITY

Any person for registration of his/her company has to register it with the Accounting and Corporate Regulatory Authority (ACRA). ACRA is the registrar in Singapore responsible for such registration. ACRA has a fully automated system of registration. The system processes the information and another process in such an amicable manner that in normal circumstances, a company can be registered on the same day.

A person needs to comply with two distinct steps for the purpose of registration of his companies:

  1. Name Reservation

To incorporate a company, it is important to register it under the law. For any company to be registered, it should first apply for reservation of a name. The reservation of name will be a quick process only if the name applied for reservation will comply with the following list: 

  1. Any name that has been applied for the process of the reservation should be unique in nature, it should not be misleading with any other name, and it should avoid the use of obscene character or any abusive language or words.
  1. Any name that would result in infringement of any company’s or business’s trademark would not be entertained; every person should take full cognizance of the matter that such name should be free of copyrights issue.
  1. Register Company

Any person applying for the reservation of name includes any word which conveys the authority that it is going to be an institution helping in finance, education or any other sector as mentioned by the Singaporean Law, and then such person needs to take approval from external authority. The words for which prior approval is required are “Banks, Finance, Education, and Media”.

After the due process of registration of the name in compliance with the above-mentioned provisions, such name of the company is reserved for the period of 60 days. Every person is advised to register his/her company within the said period of sixty days beyond the mentioned time frame. A person has to file the reason stating why he/she was unable to register the company within the time limit. Such filing of reason can be done by the registering agent also.

Accounting and Corporate Regulatory Authority deals and regulates the registration and administration of a corporation in Singapore; the following link will help you in executing the above process for incorporation and incidental rules relating to the companies.

https://www.acra.gov.sg/

INCORPORATION OF ANENTITY IN SINGAPORE

There are specific laws that regulatethe registration of companies or business entities in Singapore.The Accounting & Corporate Regulatory Authority (ACRA), which acts as the Company Registrar of Singapore supervises the process for company registration in Singapore.

Following are the general guidelines to comply for registering an LLC/Public Limited Company/ Private Limited Company/ LLP. Any person willing to incorporate any other business entity should visit the official website of registration and follow the guidelines mentioned therein:

  1. Your Company Name needs to be approved before registration.
  1. A company before registration has to appoint a resident director as a compliance requirement; additionally, a person can appoint ‘N’ number of resident and non-resident director. All the appointed directors should be above 18 years of age, should be solvent and not bankrupt and also should be free from any malpractice or allegation of such act in the past.
  1. A person incorporating a company in Singapore should at least have a minimum of one member to a maximum of 50 members. Members/shareholders of the company can be residents of the country or non-residents. 100% non-local shareholding is allowed, shares are freely transferable.
  1. You need to appoint a resident company secretary within six months of the company’s registration; a sole director and/or shareholder cannot act as company secretary.
  1. A person incorporating the company can incorporate with a minimum capital of 1$.
  1. Any person incorporating a company in Singapore has mandatorily provided an address of a Registeredoffice. The address provided by such a person should be of any place within the limits of Singapore and it should have a physical presence in Singapore.

DOCUMENTS REQUIRED FOR REGISTRATION

To register your company under the Singaporean laws, a person needs to submit the following documents:

  1. Company Name
  2. Brief descriptions of the company’s activities
  3. Shareholder’s particular
  4. Registered address
  5. Particulars of Company Secretary

Additional requirements by Non-residents:

  1. Proof of overseas residential address
  2. Copy of Passport
  3. Other Know Your Clients (KYC) information such as bank reference letters, personal profile and business profile.

ADDITIONAL CONDITIONS

All the above are the general guidelines to be followed by a person incorporating a company in Singapore. Following are some additional conditions that are to be followed for incorporating a company in Singapore by a non-resident person:

  1. Self-registration of the company by any other person is not allowed as per Singaporean Laws. Any entity to be incorporated in Singapore should be done by appointing the specific agencies required in such a process from Singapore only.
  1. For incorporating a company in Singapore, it's mandatory for a person to appoint one person as the director of the company and such person should be a resident of Singapore.
  1. Any person willing to incorporate a company in Singapore would not necessarily to have work visa from Singaporean authorities, he/she can deal with any matters of the company on the basis of visitor visa. This condition is only applicable to a person who is operating his/her company not from Singapore or the operating control is overseas.
  1. Any person willing to move from his/her country to Singapore in order to operate his/her company, such person should apply for an Employment Pass or Entrepreneur Pass that will allow him to have permission to work as the director in Singapore.

Employment pass: - An Employment Pass or EP is a Singapore work visa issued by Singapore's Ministry of Manpower to foreign professional employees, managers, and owners or directors of Singaporean companies.

Entrepreneur Pass: - The Entrepreneur Pass allows eligible foreigners to start and operate a new business in Singapore.

POST REGISTRATION REQUIREMENTS

Certificate of Incorporation: -The registrar, after due consideration of all documents submitted by a person for registration as required by the law, approves the company’s name in its register. A certificate is issued in both hard and soft copy after the payment of fees to the registrar. The certificate of incorporation also includes corporate identification number.

Company Business Profile: - Any person can obtain the detail information of the company right after the completion of the incorporation process. Such information will be available only after making an application to the concerned authorities. The business profile basically includes details about the company and its working.

The Company Business Profile entails the following key details:

  1. Registration number and name of the Company.
  2. If any company has registered itself previously with any other name, such name should also be mentioned in the profile of the company business.
  3. The date of registration.
  4. The core business of the Company.
  5. The amount of Paid-up capital.
  6. Details of registered address of the company.
  7. Particulars of Directors, Shareholder and Company Secretary.
  8. Any other documents required as per the Singaporean Laws.

Opening of Bank Account

A company promoter will be mandatorily required to open a corporate bank account. As per the new KYC norms, it is mandatory for a company to have a physical presence of its stakeholder to open a bank account.

Obtain Business License and Permit

There is no hard and fast rule for any person to obtain a license and permit for his business. There are some businesses where the license approval is mandatory.

Company’s Stamp: Every Company has rubber stamps which help to validate any documents that have to be mandated by the company. The rubber stamp is a way of authentication of documents in a more professional way as it includes the name and registration number of the company. 

Company Seal: A company seal is like a signature of the company. As a company is an artificial person, it cannot sign on own, so a company seal or common seal is said to be a signature by a company — this help to validate the document such as Loan agreement, share Certificate and other legal documents.

Share Certificates: A share certificate is a document similar to the acknowledgement of money invested by a person towards the capital of the company. A share certificate is issued by Company Secretary of a Company under his authority by Singaporean Law.

First Board Resolution: At the first Board meeting of the company after its incorporation, a resolution has been passed regarding the appointment of Auditors, Company Secretary and Directors.

INTELLECTUAL PROPERTY RIGHTS

An intangible asset that is the result of creativity results in forming of Intangible asset. An intellectual property right is right of a person on his/her creativity, and it is important for a person to protect such property from being copied/ plagiarized.

The Singapore government encourages the development and registration of IP through generous financial incentives and a favorable tax regime. There are many challenges faced by startups, in looking to address this issue, Singapore invest in a several IP schemes that will help companies to register their patents despite scarcity of cash. For example, it provides grants for IP development to small and medium-sized companies (with at least 30% local shareholding) or to companies that want to expand overseas. It also offers a Productivity and Innovation Credit (PIC) for companies that spend money on developing IP.

https://www.ipos.gov.sg/growing-your-business-with-ip/funding-assistance

Following are the protection allowed by Singapore authorities in case of Intellectual Property:

  1. Patents

A patent is a right granted to the owner of an invention that prevents others from making, using, importing or selling the invention without his permission. A patent in Singapore is valid for 20 years, so long as the owner pays the annual renewal fees.      

  1. Copyrights

Copyright is the right given to the owner of an original work. This right can subsist in literary works such as books and computer software, musical works, dramatic works, artistic works, sound recordings, films, broadcasts, cable programmes and the typographical arrangement of published editions of literary, dramatic or musical works, as well as artists’ performances.General protection of 70 years is accorded which varies according to the type of Copyright.

  1. Trademark

A trademark is a sign that distinguishes the goods and services of one trader from those of others. Typically a trademark can be words (including personal names), indications, designs, letters, characters, numerals, figurative elements, colours, sounds, smells, the shape of the goods or their packaging or any combination of these. A sign must be capable of being represented graphically in order for it to be registered as a trademark. A trademark lasts indefinitely so long as you register it every 10 years, and it can be licensed or sold to others. It will only be revoked if the owner does not use it within 5 years of registering it.

  1. Design

A design refers to the features of a shape, configuration, colours, pattern or ornament applied to any article or non-physical product that give that article or non-physical product its appearance. It protects the external appearance of the article or non-physical product.

Once your design is registered, it will be protected for an initial 5 years from the date of filing. Thereafter, the registration is to be renewed every 5 years, up to 15 years. 

  1. Geographical indication

A geographical indication (GI) refers to an indication used in trade to identify a product as originating from a particular territory which has given the product its special quality or reputation. Once a geographical indication is registered, it will be protected for 10 years. The registration may be renewed upon its expiry.

Singapore recognizes other types of IP, such as

  • Confidential information and trade secrets,
  • plant varieties
  • industrial designs

If you would like to learn more about the protections provided by Singapore for these types of IP, please visit their official website https://www.ipos.gov.sg/understanding-innovation-ip

Singapore consistently ranks among the best in the world for its IP environment. Singapore is a part of several international treaties to accommodate international filings.

Conventions

Signatory

World Intellectual Property

?

Berne Conventions

?

PCT

?

Paris Conventions

?

Madrid System

?

Doha

?

Universal Copyright Convention

?

Nice Agreements(International Classification of Goods& services)

?

Geneva Convention (phonograms)

?

First to use or First to File

First to use

* First to Use: In orderto acquire ownership of an IP, it is not enough to have invented the mark first or even to have registered it first; the party claiming ownership must have been the first to actually use the IP in commerce. 

TAXATION

Corporate Tax

Regardless of any person, everyone has to pay corporate tax under the Income Tax Act. A person eligible to pay taxes in Singapore under the Income Tax Act needs to file corporate tax by 15th December if he pays such tax online. Andif the company plans to file such tax physically, he needs to file tax by 30th November. A person needs to pay a tax of 17% on the chargeable income; it is same for all the corporate in Singapore.

Tax benefits compliance for Startup Companies

Any person willing to incorporate a company or any form of business will be allowed the have tax benefits. The authorities in Singapore in order to promote the business opportunities have provided tax benefits for startups to attract investments in the country. For startups to avail these tax benefits, they will have to comply with the following conditions:

  1. The company must be registered should be Singapore Registered Company.
  2. The Company should be resident liable to pay tax in the assessment year.
  3. The company should have a cap limit of 20 shareholders.

StartupSchemes:

  1. Any startup which will comply with the above-mentioned condition will be allowed to have a full exemption on tax liability on the first SG$ 1, 00,000 of the normal chargeable income, i.e. the income that is taxed at the prevailing corporate tax rate.
  2. Additionally, the company will be exempted up to 50% of tax on the next SG$2, 00,000 normal chargeable incomes.
  3. The above exemption is allowed for every startup for the period 3 consecutive assessment years.
  4. As a result of these benefits, the effective tax rate of most startups is drastically reduced in the first three years of their operation.

https://www.iras.gov.sg/irashome/Businesses/Companies/Learning-the-basics-of-Corporate-Income-Tax/Common-Tax-Reliefs-That-Help-Reduce-The-Tax-Bills/

Companies that qualify for the above Tax Exemption Scheme for startups, theyshould note that the qualifying deductions (i.e. current year unutilized capital allowance and/ or unutilized trade losses) will be first used to set off against its assessable income for the Year of Assessment (YA) immediately preceding the YA of loss. This means that, when the chargeable is nil after deducting the loss carry-back relief, the company will not be able to enjoy the benefit given under the Tax Exemption Scheme for New Start-Up Companies for that particular YA.

When there is chargeable income after deducting the loss carry-back relief, the company can claim Tax Exemption Scheme for New Start-Up Companies up to the first $100,000 for that particular YA and a further 50% exemption is given on the next $200,000 of the chargeable income (from YA 2008 onwards).

https://www.iras.gov.sg/irashome/Businesses/Companies/Working-out-Corporate-Income-Taxes/Claiming-Reliefs/Loss-Carry-Back-Relief/

GST

If the expected annual turnover of your new company is more than S$1 million, your company must register for GST. It is an indirect tax levied on the consumption of goods and services in Singapore. For your GST-registered company, you will need to charge the applicable GST rate (7%) to the consumers of your goods and services. And, the amount has to be remitted to the tax authorities. GST filing is a compliance requirement for all GST-registered businesses.

Any person who is eligible for filling GST under the jurisdiction of Singapore can further visit the following link:

https://www.iras.gov.sg/irashome/GST/GST-registered-businesses/Filing-your-taxes/How-to-File-Tax/Overview-of-GST-e-Filing-Process/

COMPLIANCE REQUIREMENTS

  1. Filing procedure for ECI form

In Singapore, the process of paying corporate taxes generally begins by filing an Estimated Chargeable Income (ECI) form providing an estimate of the company’s chargeable income with IRAS within 3 months of their financial year-end.

All companies are required to file an ECI unless it has annual revenue of not more than $5 million and there is no estimated chargeable income for that, in which case it would be exempt from filing an ECI.

  1. Filing procedure for Annual Income Tax Return

IRAS is an authority responsible for regulating and administrating the tax system in Singapore. Every person, after its incorporation of the company, should be registered with the tax authority in Singapore, i.e. IRAS.

ECI is a statement of the company which shows the estimated income of the company which though been an important document is just estimation, so every company is required to file the Income Tax Return. Income Tax Return is a statement of the Company’s actual income and expenses with a structured arrangement.

Every Company is required to file an Income Tax Return with authority annually. Every company is required to file such return even though the company is making losses, the company is up for liquidation or been stuck off.

Companies must generally file their Income Tax Return using Form C, which requires the submission of financial statements, tax computation and supporting schedules.

However, a company may qualify to submit the simplified Form C-S instead, if it meets the following conditions:

  1. The company is incorporated in Singapore.
  2. The company has an annual revenue of S$5 million or less.
  3. The company’s income is taxed at the standard corporate tax rate of 17% (in other words, the company must not have income tax at reduced rates, such as in certain promoted industries).
  4. The company is not claiming any special schemes such as investment allowances or foreign tax credits.

For more information, a person may visit the website of the Inland Revenue Authority of Singapore via the following link:

https://www.iras.gov.sg/irashome/Businesses/Companies/Filing-Estimated-Chargeable-Income--ECI-/Filing-Estimated-Chargeable-Income--ECI--and-Paying-Estimated-Taxes/

  1. Accounting Requirements: All Singapore companies must maintain their accounting books, be it the general ledger, accounts payable and account receivables, or fixed asset ledger. Every account must be maintained on a timely basis. The annual financial statement must be prepared and filed with the authority in XBRL format.
  1. Convening of AGM: It is a mandatory requirement for every company to hold its AGM in every calendar year. The financial statements of the company are tabled for the approval of shareholders.
  1. Annual Returns Filing: Filing of Annual Returns has to be done after one month from the date of the AGM of the company.
  1. Corporate Tax Filing: The last dates of taxfiling for companies are 30 November (paper-filing) and 15 December (e-filing).
  1. Financial Year Determination: Every company in Singapore is free to determine its financial year. It does not necessarily need to be January to December or April to March, accounting cycle. The financial year (accounting cycle) can start in any month of the year.

CONCLUSION

Singapore,with all the above benefits, has also been termed as Asia’s best city recorded by Mercer’s 2014 in its index of Quality of Living Worldwide; it provides an environment-friendly location. Singapore has also been ranked as 10th country among 189 other countries in the list of ease in doing business by the report as submitted by the World Bank.

The Economic Intelligence Unit (EIU)is a unit that works for making a detailed survey of the economies of various countries and provides remark based on their case study. EIU has ranked Singaporethe Number 1country among other 89 to provide a fair and open economy for setting up the business by the foreigners. As the impact of globalization has brought the world closer in terms of doing business, the advancement there are not just tangible but also intangible assets that form an integral and important asset of the business. Singapore has proven itself in providing better protection to the IPR of companies. Singapore has been ranked 2nd in terms of providing better protection to Intellectual Property Rights as per the report provided under WEF’s  Global Competitive Forum. After so many accolades and more recognitions coming its way, Singapore stands to be an ideal place to set up a business for growth.

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