Joint Ventures & Foreign Coolaborations

JOINT VENTURE & FOREIGN COLLABORATION GROUP-B ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

WHAT IS A JOINT VENTURE ? ,[object Object],[object Object],[object Object],[object Object]

WHY JOINT VENTURE? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],WHY JOINT VENTURE?

SOME RECENT J.V.’S IN INDIA ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

MAJOR ISSUES IN JOINT VENTURES ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],MAJOR ISSUES IN JOINT VENTURES (Contd…..)

INDIA’S POLICY ON JOINT VENTURE ,[object Object],[object Object]

BASIC LEGAL & REGULATORY FRAMEWORK ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

FEMA implications for foreign collaborations ,[object Object],[object Object],[object Object],[object Object]

Direct Investment outside India (ODI) [FEM (Transfer or issue of any foreign security) Regs., 2004] ,[object Object],[object Object], either by market purchase, or private placement or through stock exchange. (c) market purchase of existing shares of foreign entity; (b) Subscription to MoA of foreign entity (a) Contribution to the capital;

Definitions (Contd…..) II. Financial Commitment : means the amount of direct invst. by way of: III. Joint Venture : means a foreign entity, formed, regd. or incorporated, under the law of the host country in which Indian Party makes DI. IV. Wholly Owned Subsidiary (WOS): means a foreign entity formed registered or incorporated in accordance with the laws & regulations of the host country & whose entire share capital is held by the Indian Party.  Issued by an Indian Party to or on behalf of its overseas Joint Venture Company or Wholly Owned Subsidiary. (b) 100% of the amount of guarantees; (a) Contribution to equity and loan;

Definitions (Contd…..) V. Indian Party means:  making investment in JV or WOS abroad, and includes any other entity in India as may be notified by the RBI. (c) a partnership firm regd. under the Indian Partnership Act, 1932. (b) a body created under an Act of Parliament (a) company incorporated in India;

Prohibition on DIOI (Reg.5) ,[object Object],[object Object]

General permission for direct investment (Reg.7) In Financial Services Sector  (By whom allowed) Indian Parties (Reg.6B) In equity of cos. Regd. overseas  (By whom allowed) PRI, being an individual or a listed Indian Company. (Reg.6A) In agricultural Operations overseas  (By whom allowed) PRI being company incorporated in India, or a firm (Reg.6) Automatic Route  (By whom allowed) Indian parties

Automatic route for ODI (Reg.6) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

II. Methods of funding ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

III. Valuation of shares ,[object Object],[object Object],For investment more than US $5 million or its equivalent;  Valuation has to be done by a SEBI Category I Merchant Banker / Investment Banker of the host country. Where investment is upto US $5 million, or its equivalent;  Valuation has to be done by a Chartered Accountant or Certified Public Accountant.

IV. Obligations of Indian Party (contd……) ,[object Object],[object Object],[object Object],[object Object]

FOREIGN DIRECT INVESTMENT Regulated by FEM (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000

Permission for purchase of shares by certain PROIs ,[object Object],[object Object],[object Object],[object Object],[object Object]

Foreign Direct Investment Scheme (Schedule I) FDI is permitted through any of the following two ways: Special Permission If conditions of the automatic route are not satisfied / or if company is not otherwise eligible to accept shares: Previous approval of FIPB to be taken. General Permission (Automatic route) (As per conditions specified)

Conditions for availing Automatic Route ,[object Object],[object Object],[object Object],[object Object],[object Object]

Additional restrictions ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Additional Restrictions (Contd…..) Exception: An SSI which is an EOU / unit located in FTZ / EPZ / STP / EHTP may issue shares / convertible debentures to a PROIs in excess of 24%, without complying with the specified conditions above, provided it complies with the ceilings specified in Annexure B. Issue Price For unlisted companies, as per guidelines issued by erstshile CCI, in all other cases. In case of a listed company, as per SEBI Guidelines.

Mode of Payment for shares issued to PROIs ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Foreign Technology Agreements ,[object Object],[object Object],[object Object],[object Object],[object Object]

Synopsis ,[object Object],[object Object]

I. Provisions of IT Act, 1961 providing relief on specific incomes of foreign collaborators ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

B. Sections under IT Act, affecting specific incomes of foreign collaborators ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Section 115A : Tax on interest, royalty, fees etc Where total income of an non resident (not being a company) or a foreign company includes any income: ,[object Object],[object Object],[object Object],by way of interest from Govt. or an Indian concern on monies borrowed by them in foreign currency: Such income shall be taxable @ 20%.

Section 115AB : Tax on LTCG from transfer of units purchased in foreign currency ,[object Object],[object Object],[object Object]

Section 115AC : Tax on income from bonds / GDRs etc ,[object Object],[object Object],[object Object],[object Object],[object Object]

Section 115AD: Tax on income of FIIs from securities Where total income of an FII includes any income by way of: Long term capital gains (LTCG) on such securities: Such income shall be taxable @ 10%. Short term capital gains (STCG) on such securities: Such income shall be taxable @ 30%. interest income from securities (other than units referred u/s 115AB). Such income shall be taxable @ 20%.

II. Measures for tax planning for foreign collaborators ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Section 9 : Definition of deemed to be accrued (includes principal-agent relationship with residents)

When non-resident not liable to pay tax Income deemed to be accrued in India Income accrued in India Income deemed to be received in India Income received in India

Measure to be taken by non-resident ,[object Object],[object Object],[object Object],[object Object],[object Object]

SUMMARY ,[object Object],[object Object],[object Object],[object Object],[object Object]

Joint Ventures & Foreign Coolaborations

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