Set Up a Wholly Owned Subsidiary in India from Denmark

How to Set Up a Wholly Owned Subsidiary in India from Denmark

A Wholly Owned Subsidiary (WOS) is the most popular corporate structure for Danish companies seeking full operational control in India. A WOS is a separate Indian legal entity — incorporated as a Private Limited Company under the Companies Act, 2013 — where the Danish parent company holds 100% of the equity shares. This structure offers complete management autonomy, limited liability protection for the parent, and the ability to carry out any lawful commercial activity in India.

India-Denmark economic ties have grown steadily, with bilateral trade in goods and services reaching approximately USD 6.1 billion in 2024. Around 200 Danish companies have invested in India across sectors such as shipping, renewable energy, environment, agriculture, food processing, and smart urban development. Companies like AP Moller Maersk, Vestas, Grundfos, Danfoss, Carlsberg, Novo Nordisk, and FLSmidth have established Indian subsidiaries. In November 2025, India and Denmark launched the Indo-Danish Business Council (IDBC) to further strengthen bilateral investment ties. In August 2024, Denmark-based Rockwool announced its largest factory in India with an investment of INR 5.5 billion in Tamil Nadu.

A WOS provides the Danish parent with complete control over strategic decisions, intellectual property, and profit repatriation — without the complexities of managing an Indian joint venture partner. This guide walks through every step from FDI regulatory requirements to post-incorporation compliance.

FDI Route and Regulatory Requirements

Danish companies setting up a WOS in India benefit from the automatic route for Foreign Direct Investment. Under this route, no prior approval from the Reserve Bank of India (RBI) or the Indian government is required. The Danish parent simply invests in its Indian subsidiary and reports the transaction to the RBI within prescribed timelines.

100% FDI Under the Automatic Route

India permits 100% FDI through the automatic route in most sectors, making it straightforward for Danish companies to establish a WOS. Key sectors where 100% FDI is allowed under the automatic route include:

• Manufacturing (all categories)
• Information technology and IT-enabled services
• E-commerce (marketplace model)
• Food processing and cold chain infrastructure
• Renewable energy and clean technology
• Infrastructure and construction development
• Pharmaceuticals (greenfield projects)
• Insurance (up to 100% under automatic route as per Union Budget 2025-26, subject to conditions)

Sectors with FDI Caps

Certain sectors maintain restrictions even under the automatic route:

• Defence: 74% under automatic route; beyond 74% requires government approval on a case-by-case basis
• Telecom: 100% permitted, with automatic route up to 49% and government approval beyond
• Banking (private sector): Up to 74% under automatic route
• Multi-brand retail: Up to 51% with government approval

Press Note 3 — Not Applicable to Denmark

Press Note 3 (2020) imposes additional security screening on investments from countries sharing a land border with India (China, Pakistan, Bangladesh, Nepal, Myanmar, Bhutan, and Afghanistan). Denmark is exempt from these restrictions, so Danish investments do not require any additional security clearance.

Key RBI and FEMA Requirements

All WOS establishments must comply with the Foreign Exchange Management Act (FEMA) and the Non-Debt Instrument (NDI) Rules. The Danish parent must ensure that share issuance pricing complies with FDI pricing guidelines — shares must be issued at or above fair market value as determined by a registered valuer using internationally accepted pricing methodologies such as Discounted Cash Flow (DCF).

DTAA Benefits for Danish Investors

The India-Denmark Double Taxation Avoidance Agreement, originally signed on 8 March 1989 and amended by a Protocol signed on 10 October 2013 (effective 1 February 2015), provides substantial tax advantages for wholly owned subsidiaries. For Danish parent companies receiving income from their Indian subsidiary, the treaty reduces withholding tax rates significantly.

Treaty Rates for WOS Transactions

• Dividends: 15% for significant shareholding (25% or more), 25% otherwise (domestic rate: 20%). For a WOS where the Danish parent holds 100%, the 15% rate applies.
• Interest: Capped at 10% for bank loans; 15% for other interest (domestic rate: 20%). Relevant if the Danish parent provides inter-company loans to the Indian WOS.
• Royalties: Capped at 20% (domestic rate: 20% under Section 115A since 1 April 2023). Applies to technology licensing fees paid by the WOS to the Danish parent.
• Fees for Technical Services: Capped at 20%. Covers management fees, consulting fees, and technical support charges.

Transfer Pricing Considerations

Transactions between the Danish parent and the Indian WOS must comply with India's transfer pricing regulations. All inter-company transactions — including management fees, royalties, shared services, and goods transfers — must be conducted at arm's length prices. If the aggregate value of international transactions exceeds INR 1 crore, the WOS must maintain detailed transfer pricing documentation and file Form 3CEB with the income tax return.

Permanent Establishment Risk

Danish companies should structure their WOS operations carefully to avoid creating a Permanent Establishment (PE) risk for the parent company. If the Indian WOS acts as a dependent agent of the Danish parent — habitually concluding contracts on its behalf — the Danish parent may be deemed to have a PE in India, triggering additional tax obligations under Indian law.

Document Requirements and Authentication

Both Denmark and India are members of the Hague Apostille Convention, which means documents from Denmark must be apostilled for use in India. This is significantly faster than the embassy attestation process required for documents from non-Hague member countries.

Documents from the Danish Parent Company

• Certificate of Registration from Erhvervsstyrelsen (Danish Business Authority) — apostilled
• Board resolution of the Danish parent authorising the establishment of an Indian subsidiary and appointing authorised signatories — apostilled
• Memorandum of Association (Vedtaegter) and Articles of Association of the Danish parent — apostilled
• Latest audited financial statements of the Danish parent company
• Power of Attorney in favour of the Indian authorised representative — apostilled
• Declaration of source of funds for the investment

Documents for Directors of the Indian WOS

• Passport copies of all proposed directors (notarised and apostilled)
• Proof of residential address (bank statement or utility bill, not older than 2 months) — notarised and apostilled for Danish directors
• Digital Signature Certificates (DSC) for all directors
• Passport-size photographs
• PAN card of the Indian resident director (if already existing)

Apostille Process in Denmark

Apostilles in Denmark are issued by the Danish Ministry of Foreign Affairs (Udenrigsministeriet). The fee for each apostille is DKK 195 (approximately INR 2,400). Documents must first be notarised and then presented for apostille. The apostille certificate is a standardised stamp in Danish with the obligatory heading "Apostille" and a reference to the 1961 Hague Convention. Processing typically takes 3-5 business days.

Step-by-Step Registration Process

Setting up a WOS follows the same incorporation procedure as a Private Limited Company, with additional steps for parent company documentation and RBI compliance.

Step 1: Danish Parent Company Board Approval

The board of directors of the Danish parent must pass a formal resolution approving the establishment of an Indian subsidiary. This resolution should specify the authorised capital, initial investment amount, names of proposed directors, and the business activities to be undertaken. The resolution must be apostilled by the Danish Ministry of Foreign Affairs.

Step 2: Obtain Digital Signature Certificates

All proposed directors need a Class 3 DSC from an Indian certifying authority. Danish directors can complete the process through video-based verification. Timeline: 1-2 working days.

Step 3: Apply for DIN via SPICe+

Director Identification Numbers for up to three directors are applied for within the integrated SPICe+ form. A minimum of two directors is required, with at least one being a resident of India (having stayed in India for at least 182 days in the preceding financial year).

Step 4: Reserve the Company Name

Submit the proposed name through SPICe+ Part A. For a WOS, the name typically incorporates the Danish parent's brand name followed by "India Private Limited." Name approval takes 2-3 working days.

Step 5: File SPICe+ Part B for Incorporation

File the comprehensive incorporation form including e-MOA, e-AOA, and applications for PAN, TAN, GST registration, EPFO, and ESIC. The authorised capital of the WOS should reflect the intended investment quantum.

Step 6: Receive Certificate of Incorporation

The Registrar of Companies issues the Certificate of Incorporation upon successful verification. Timeline: 7-15 working days from submission.

Step 7: Open Bank Account and Receive Capital

Open a current account with an Authorised Dealer (AD) bank in India. The Danish parent then remits the share subscription amount via SWIFT transfer. The AD bank credits the funds and issues a Foreign Inward Remittance Certificate (FIRC).

Step 8: Allot Shares and File FC-GPR

Allot shares to the Danish parent within 60 days of receiving the investment funds. File Form FC-GPR on the RBI's FIRMS portal within 30 days of share allotment. Late filing attracts penalties of INR 7,500 plus 0.025% of the investment amount per day of delay.

Timeline and Costs

The WOS setup process takes slightly longer than a standard Private Limited Company registration due to additional parent company documentation and RBI compliance requirements.

Total estimated timeline: 4-8 weeks from Danish parent board resolution to fully operational WOS.

Total estimated cost: INR 1,00,000-3,00,000 (approximately DKK 8,500-25,000) including government fees, professional fees, and valuation costs. The actual capital investment is separate and depends on the business plan.

Post-Registration Compliance

A WOS in India has extensive ongoing compliance obligations with the MCA, RBI, and Income Tax Department. Timely compliance is essential to avoid penalties and ensure smooth operations.

Annual MCA Filings

• Annual Return (MGT-7): Filed within 60 days of the AGM.
• Financial Statements (AOC-4): Filed within 30 days of the AGM.
• Board Meetings: Minimum 4 per year with a gap of not more than 120 days.
• Annual General Meeting: Must be held within 6 months of the financial year end.

RBI and FEMA Compliance

• FLA Return: Annual Return on Foreign Liabilities and Assets, due by July 15.
• FC-GPR: Filed within 30 days of every fresh share allotment to the Danish parent.
• ECB Reporting: If any external commercial borrowings are raised from the parent.
• FEMA compliance: Ongoing monitoring of all cross-border transactions.

Tax Compliance

• Corporate Tax Return: Due by October 31 (November 30 for transfer pricing cases).
• GST Returns: Monthly or quarterly depending on turnover.
• Transfer Pricing Report (Form 3CEB): Due by October 31 if international transactions exceed INR 1 crore.
• TDS Returns: Quarterly filing for all tax deducted at source.
• Advance Tax: Quarterly instalments on June 15, September 15, December 15, and March 15.

Common Challenges for Danish Companies

Danish companies setting up a WOS in India face several country-specific challenges that require careful planning.

Capital Structuring and Pricing

Under FEMA regulations, shares in the Indian WOS must be issued at or above fair market value determined by a registered valuer using DCF or other internationally accepted methodologies. This can be complex for initial investments where the subsidiary has no operating history. Work with a qualified FDI advisor to structure the investment optimally.

Transfer Pricing Scrutiny

India's transfer pricing regime is among the most rigorous globally. Danish parent companies that charge management fees, royalties, or shared service costs to their Indian WOS should ensure comprehensive documentation with benchmarking studies. The royalty withholding rate under the India-Denmark DTAA at 20% is higher than many other Nordic treaties, making structuring particularly important.

Green Strategic Partnership Alignment

India and Denmark established a Green Strategic Partnership in 2020 focusing on clean energy, sustainable urbanisation, and circular economy. Danish companies in these sectors can leverage this bilateral framework for smoother regulatory interactions and potential government support for their Indian operations.

Resident Director Requirement

At least one director must have resided in India for a minimum of 182 days in the preceding financial year. Many Danish companies initially use a resident director service, transitioning to a full-time Indian executive as operations scale up.

Repatriation of Profits

While India permits free repatriation of dividends and profits, the process involves specific banking procedures and compliance with dividend repatriation requirements. The 15% withholding rate under the DTAA applies for WOS dividends, and proper documentation of the treaty benefit claim is necessary.

Frequently Asked Questions

What is the difference between a WOS and a regular Private Limited Company in India?

Structurally, a WOS is a Private Limited Company. The term "Wholly Owned Subsidiary" refers to the ownership structure where a single foreign parent holds 100% of the equity shares. The legal form, registration process, and compliance requirements are identical to any Private Limited Company under the Companies Act, 2013.

Can the Danish parent provide loans to its Indian WOS?

Yes. The Indian WOS can receive External Commercial Borrowings (ECB) from the Danish parent, subject to RBI regulations on ECB. The interest rate must comply with the all-in-cost ceiling specified by the RBI, and the borrowing must be reported through the ECB-2 return on the RBI's FIRMS portal.

How long does the entire WOS setup process take from Denmark?

The end-to-end process typically takes 4-8 weeks from the date of the Danish parent's board resolution. Document apostille in Denmark takes 3-5 business days, and the SPICe+ incorporation process takes 7-15 working days. Capital remittance and share allotment add another 2-3 weeks.

Does the Danish parent need to visit India for WOS registration?

No. The entire process can be completed remotely. Directors can obtain DSCs through video verification, and apostilled documents can be couriered. However, visiting India is recommended for bank account opening, as some banks prefer in-person KYC verification for the initial account setup.

What happens if we miss the FC-GPR filing deadline?

Late filing of FC-GPR attracts a Late Submission Fee calculated as INR 7,500 plus 0.025% of the investment amount multiplied by the number of days of delay. The penalty is capped at the total investment amount. Persistent non-compliance can result in compounding proceedings under FEMA.

Can the Indian WOS operate in the Danish parent's brand name?

Yes. The WOS can operate under the Danish parent's brand through a trademark licensing arrangement. The licensing fees paid by the WOS to the parent would be subject to the 20% withholding tax rate on royalties under the India-Denmark DTAA, and must comply with transfer pricing regulations.