How to Set Up a Wholly Owned Subsidiary in India from Germany
A Wholly Owned Subsidiary (WOS) is a company where the foreign parent holds 100% of the equity share capital. For German multinational corporations, automotive suppliers, engineering firms, and Mittelstand companies entering India, a WOS provides complete operational control without the need for a local partner or joint venture arrangement.
With cumulative German FDI inflows of US $15.63 billion (April 2000 – March 2025), Germany ranks as India's 9th largest foreign investor. Major German corporations including Bosch, Siemens, BMW, Volkswagen, BASF, and Deutsche Bank have established WOS entities in India across manufacturing, automotive, chemicals, financial services, and technology sectors.
A WOS in India is structured as a Private Limited Company under the Companies Act, 2013, with the German parent (GmbH, AG, or other entity) holding 100% of shares. This provides limited liability protection to the parent company while creating a distinct legal entity for Indian operations.
FDI Route & Regulatory Requirements
Germany does not share a land border with India, so the Press Note 3 of 2020 restrictions do not apply. German companies can invest up to 100% under the automatic route in most sectors — no prior approval from the RBI or government is required.
Key regulatory requirements for establishing a WOS include:
- Board resolution: The German parent company's Vorstand (board) or Geschäftsführung (management) must pass a resolution authorising the investment, specifying the amount of capital to be invested and the authorised signatories
- Share pricing: Shares issued to the German parent must be at fair market value determined by a SEBI-registered merchant banker or practising CA (for new incorporations, face value is permitted)
- FC-GPR filing: Within 30 days of share allotment, the WOS must file Form FC-GPR on the FIRMS portal to report the foreign investment
- Advance reporting: Within 30 days of receiving the inward remittance from Germany, report to the Authorised Dealer Bank
Sectors with FDI caps apply equally to WOS structures. In capped sectors (e.g., insurance at 100% (with conditions), multi-brand retail at 51%, defence at 74% automatic / 100% government route), a 100% WOS may not be possible, and a joint venture structure may be required instead.
Downstream Investment Rules
If the WOS plans to make downstream investments into other Indian entities, the investment will be treated as indirect foreign investment. The downstream entity must comply with entry route, sectoral cap, and pricing guidelines as if the investment were coming directly from Germany.
DTAA Benefits for German Investors
The India-Germany DTAA, effective since 26 October 1996, is particularly advantageous for WOS structures where regular profit repatriation to the German parent is planned:
- Dividends: 10% withholding (reduced from 20% domestic rate)
- Interest on ECBs: 10% withholding — relevant if the German parent extends External Commercial Borrowing (ECB) to the WOS
- Royalties: 10% — applies to technology licensing and IP royalty payments from the WOS to the German parent
- Fees for Technical Services: 10% — covers management fees, technical assistance, and shared services charges
For a WOS paying annual dividends of INR 10 crore to its German parent, the DTAA saves INR 1 crore annually on withholding tax alone (10% vs. 20%). The German parent can then credit Indian taxes against its German Körperschaftsteuer (corporate income tax at 15%) and Gewerbesteuer (trade tax at ~14–17%) obligations.
To claim treaty benefits, the German parent must furnish a Tax Residency Certificate from the Finanzamt, Form 10F, and a beneficial ownership declaration.
Document Requirements & Authentication
Germany has been a member of the Hague Apostille Convention since 1966. All German public documents can be authenticated via Apostille rather than the longer embassy attestation route.
Documents from the German Parent Company
- Handelsregister (Commercial Register) extract — apostilled
- Gesellschaftsvertrag (Articles of Association) or Satzung (for AG) — apostilled
- Board resolution / Gesellschafterbeschluss authorising the India investment — notarised and apostilled
- Power of Attorney in favour of the authorised signatory in India — notarised and apostilled
- Latest audited financial statements (Jahresabschluss) of the German parent
- Certified copy of the parent's registration certificate — apostilled
Documents for Directors
- Passport copies of all proposed directors — notarised and apostilled
- Address proof (recent utility bill or bank statement) — apostilled
- Passport-size photographs
- Digital Signature Certificate (Class 3) from an Indian certifying authority
All documents in German must be accompanied by certified English translations, and the translations must also be apostilled. Translations typically add 2–3 working days to the preparation timeline.
Step-by-Step Registration Process
Step 1: German Parent Board Approval (1–2 weeks)
The Vorstand or Geschäftsführung passes a resolution authorising the India WOS, specifying authorised capital, initial paid-up capital, names of proposed directors, and the registered office address in India.
Step 2: Document Preparation & Apostille (1–2 weeks)
Prepare all corporate documents, have them notarised, apostilled at the relevant German authority (Bezirksgericht or Landgericht), and translated into English by a certified translator.
Step 3: Obtain DSCs and DINs (1–2 days)
Proposed directors obtain DSCs through Indian certifying authorities using video-based KYC verification. DINs can be applied for within the SPICe+ form.
Step 4: File SPICe+ for Incorporation (7–14 days)
Submit SPICe+ Part A for name approval, followed by Part B for incorporation. The single-window form integrates company registration with PAN, TAN, EPFO, ESIC, and GST registrations.
Step 5: Receive Certificate of Incorporation
The Registrar of Companies issues the Certificate of Incorporation with the company's CIN, PAN, and TAN.
Step 6: Open Bank Account & Receive Capital (1–2 weeks)
Open a bank account with an AD Category-I bank. The German parent then remits the share subscription amount. File the advance reporting form within 30 days of receipt.
Step 7: Allot Shares & File FC-GPR (within 30 days)
Allot shares to the German parent, issue share certificates, and file FC-GPR on the FIRMS portal within 30 days of allotment. Obtain FIRC (Foreign Inward Remittance Certificate) from the bank.
Timeline & Costs
The end-to-end process for setting up a WOS from Germany typically takes 4 to 8 weeks:
- Board approval & document preparation: 1–2 weeks
- Apostille & translation: 1–2 weeks (can overlap with above)
- SPICe+ filing & incorporation: 7–14 working days
- Bank account opening: 1–2 weeks
- Capital infusion & RBI filings: 1–2 weeks
Cost Breakdown
- MCA incorporation fees: INR 500–15,000 (based on authorised capital)
- Stamp duty: State-dependent (0.15% in Maharashtra, 0.3% in Karnataka)
- Professional fees (CA/CS): INR 30,000–75,000
- DSC costs: INR 500–1,500 per director
- Apostille & translation (Germany): EUR 200–500
- Valuation report (for FC-GPR): INR 15,000–50,000
- Total estimated: INR 1,00,000–2,50,000 (approx. EUR 1,100–2,800)
Post-Registration Compliance
A WOS in India has the same compliance obligations as any Private Limited Company, with additional requirements due to the foreign ownership:
- Annual Return (MGT-7) and Financial Statements (AOC-4) — filed with ROC within 60 and 30 days of AGM respectively
- Statutory audit — mandatory annual audit by a practising CA
- Transfer pricing — all transactions between the WOS and German parent must be at arm's length, with TP documentation maintained
- FLA Return — annual return filed with RBI by 15 July for entities with FDI
- FC-TRS — required if any share transfer between residents and non-residents occurs
- Annual General Meeting — must be held within 6 months of financial year-end
- Board meetings — minimum 4 per year, at least one resident director must attend
Why German Companies Choose the WOS Structure
The WOS model is particularly well-suited for German Mittelstand companies and large corporations that value operational independence and intellectual property protection. Unlike a joint venture where control is shared with a local partner, a WOS allows the German parent to implement its own quality standards (DIN/ISO), manufacturing processes, and corporate governance frameworks without negotiation.
Key sectors where German WOS entities thrive in India include automotive and auto components (Bosch, Continental, ZF Friedrichshafen), chemicals and pharmaceuticals (BASF, Bayer, Merck), engineering and machinery (Siemens, ThyssenKrupp), financial services (Deutsche Bank, Allianz), IT services and consulting (SAP), and renewable energy. The GmbH vs Indian Pvt Ltd comparison shows structural parallels that make the transition familiar for German business leaders.
The Indian government's PLI schemes, combined with Special Economic Zones (SEZs), offer additional fiscal incentives for WOS entities in manufacturing. These incentives, coupled with the concessional 15% corporate tax rate for new manufacturing companies, make India one of the most competitive destinations for German industrial investment.
Common Challenges for German Companies
- Resident director mandate: At least one director must have stayed in India for 182 days or more during the financial year. German companies typically appoint a local professional or use a resident director service to fulfil this requirement initially
- Capital lock-in perception: While there is no formal capital lock-in, reducing capital or winding up requires NCLT approval. German companies should plan their initial capitalisation carefully
- Transfer pricing audits: WOS entities with significant related-party transactions are frequently selected for transfer pricing scrutiny. Engage in Advance Pricing Agreements (APAs) for certainty
- Dual compliance burden: The WOS must comply with both Indian regulations (Companies Act, FEMA, Income Tax Act) and German reporting requirements (HGB, Konzernabschluss if consolidated). Coordinate with auditors in both jurisdictions
- GST on imported services: Management fees, royalties, or technical services received from the German parent are subject to GST under reverse charge mechanism, adding to the effective cost
- Banking delays: Initial bank account opening for a foreign-owned entity involves enhanced KYC due diligence and can take 2–4 weeks
Frequently Asked Questions
What is the difference between a WOS and a branch office in India?
A WOS is a separate legal entity incorporated under the Companies Act with its own PAN, bank accounts, and liability shield. A branch office is an extension of the foreign parent with no separate legal identity. A WOS can engage in any lawful business activity; a branch office is restricted to specific permitted activities defined by the RBI.
Can a German AG (Aktiengesellschaft) set up a WOS in India?
Yes, any German corporate entity — GmbH, AG, UG, KGaA, or even a GmbH & Co. KG — can establish a WOS in India. The parent entity must provide its registration documents, apostilled and translated.
Is government approval required for a German WOS in manufacturing?
No, most manufacturing sectors allow 100% FDI under the automatic route. However, certain sectors like defence (above 74%), pharmaceuticals (brownfield beyond 74%), and mining require government approval. Check the consolidated FDI policy circular for your specific sector.
How is the authorised capital of the WOS determined?
The authorised capital should be set based on the parent company's planned investment and future funding needs. There is no minimum, but it determines stamp duty costs. Common practice for German WOS entities is INR 10 lakh to INR 1 crore initially, with provisions to increase later via shareholder resolution.
Can the WOS hire employees before receiving capital from Germany?
Technically, the WOS can begin operations after incorporation, but payroll and operational expenses require funding. Many companies use an interim bridge arrangement or have the initial directors fund preliminary expenses that are later reimbursed upon capital receipt.
What happens if the FC-GPR filing deadline is missed?
Late FC-GPR filing attracts penalties under FEMA and may require compounding through the RBI. The compounding fee is calculated based on the amount involved and the delay period. It is critical to file within the 30-day window.