Set Up a Wholly Owned Subsidiary in India from Israel

How to Register a Wholly Owned Subsidiary in India from Israel

A Wholly Owned Subsidiary (WOS) is the preferred entry structure for Israeli companies seeking full operational control over their Indian business operations. In a WOS, the Israeli parent company holds 100% of the shares, giving it complete authority over strategic decisions, intellectual property deployment, and profit repatriation without the complications of a local partner.

India-Israel economic ties have strengthened considerably, with bilateral trade reaching USD 6.53 billion in FY 2023-24 and the landmark Bilateral Investment Agreement signed in 2025. Israeli companies in sectors ranging from agricultural technology and cybersecurity to defence electronics and water management have established a growing presence in India through subsidiary structures. Cumulative FDI inflows from Israel reached USD 334.26 million between April 2000 and March 2025.

A WOS in India is legally structured as a Private Limited Company under the Companies Act, 2013, with the distinction that all shares are held by the foreign parent. This structure is available in all sectors that permit 100% FDI under the automatic route, which covers the vast majority of Indian industries. The parent company benefits from limited liability, and the subsidiary operates as a separate Indian legal entity with its own PAN, GST registration, and bank accounts.

FDI Route and Regulatory Requirements

Israeli companies establishing a WOS in India benefit from a streamlined regulatory process. Since Israel does not share a land border with India, investments from Israeli entities are not subject to the additional screening requirements of Press Note 3 (2020). This means Israeli parent companies can invest through the automatic route without requiring prior government or RBI approval in sectors allowing 100% FDI.

Key regulatory considerations for Israeli parent companies:

• 100% FDI sectors (automatic route): IT and BPO services, manufacturing, agriculture and food processing, e-commerce (marketplace model), healthcare, renewable energy, construction development, and most services sectors.
• Sector-specific caps: Defence (74% automatic, 100% with government approval for state-of-the-art technology), insurance (100% with conditions that all premiums are reinvested in India), telecom (100% automatic), and banking (74% automatic).
• FEMA compliance: All inbound investments must comply with the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, and the Master Direction on Foreign Investment issued by the RBI.
• Valuation requirement: Shares issued to the Israeli parent must be priced at or above fair market value, determined by a SEBI-registered merchant banker or a Chartered Accountant using DCF or other internationally accepted valuation methodologies.
• Downstream investment: If the Indian subsidiary further invests in another Indian entity, it is treated as indirect foreign investment and must comply with sectoral caps applicable to the downstream entity.

DTAA Benefits for Israeli Investors

The India-Israel DTAA, effective since 1996, provides substantial tax relief for Israeli parent companies operating through an Indian subsidiary. The treaty covers dividends, interest, royalties, and fees for technical services, reducing the overall tax burden on cross-border transactions between the parent and subsidiary.

Withholding tax rates under the India-Israel DTAA:

• Dividends: 10% (compared to 20% domestic withholding rate). Detailed rates at India-Israel dividend tax.
• Interest: 10% (compared to 20% domestic rate). See India-Israel interest tax.
• Royalties: 10% on gross amount. Details at India-Israel royalty tax.
• Fees for Technical Services: 10% on gross amount. See India-Israel FTS tax.

Both countries are signatories to the Multilateral Convention (MLI), with the Principal Purpose Test (PPT) applicable from FY 2020-21. Israeli parent companies should ensure that inter-company arrangements have genuine commercial substance and are not structured primarily to obtain treaty benefits. Maintaining proper transfer pricing documentation and substance in the Indian subsidiary is essential for sustaining DTAA claims.

To avail treaty benefits, the Israeli parent must obtain a Tax Residency Certificate (TRC) from the Israel Tax Authority and provide Form 10F to the Indian subsidiary. The subsidiary must also collect a self-declaration of no permanent establishment from the parent for certain payment categories.

Document Requirements and Authentication

Since Israel is a member of the Hague Apostille Convention, all documents from Israel must be apostilled by the designated competent authorities (such as the Israeli Ministry of Foreign Affairs). Apostille replaces the traditional embassy attestation process, reducing documentation time significantly.

Documents required from the Israeli parent company:

• Board resolution: Authorising the establishment of the Indian subsidiary, specifying the investment amount, proposed directors, and authorised capital. Must be apostilled.
• Certificate of incorporation: From the Israeli Registrar of Companies, apostilled.
• Memorandum and articles of association: Of the Israeli parent, apostilled.
• Latest audited financial statements: Demonstrating the parent's financial capacity, apostilled.
• Power of attorney: Authorising the Indian representative to act on behalf of the parent, apostilled and notarised.
• Shareholding pattern: Certified statement showing the ownership structure of the Israeli parent.

Documents required from proposed directors:

• Passport copies (front and back pages), apostilled
• Address proof (utility bill, bank statement, or government ID), not older than one year, apostilled
• Passport-size photographs
• Digital Signature Certificate (DSC) — Class 3, obtained from Indian certifying authorities
• Director Identification Number (DIN) — applied through SPICe+ form

Documents in Hebrew must be accompanied by certified English translations, notarised in Israel before apostille.

Step-by-Step Registration Process

Establishing a WOS in India from Israel follows a structured process that combines company incorporation with RBI foreign investment compliance.

Step 1: Parent Company Board Resolution

The Israeli parent company's board of directors must pass a resolution authorising the establishment of the Indian subsidiary. This resolution should specify the proposed investment amount, authorised capital, names of proposed directors, and the business activities to be undertaken. The resolution must be apostilled.

Step 2: Obtain DSCs and Prepare Documents

All proposed directors need Class 3 Digital Signature Certificates from Indian certifying authorities. Simultaneously, gather and apostille all parent company documents. This stage typically takes 5-7 days, including Hebrew-to-English translations if needed.

Step 3: Name Reservation via SPICe+ Part A

File SPICe+ Part A on the MCA portal to reserve up to two company names. The name should typically reflect the parent company's name or business activity with "India" or "Private Limited" appended. The CRC responds within 1-2 working days, and the reserved name is valid for 20 days.

Step 4: File SPICe+ Part B for Incorporation

Submit the comprehensive SPICe+ Part B form, which integrates:

• Company incorporation with the Registrar of Companies
• PAN and TAN allotment
• EPFO and ESIC registration
• GST registration
• Bank account opening request (AGILE-PRO-S)

Attach the e-MoA (INC-33) and e-AoA (INC-34), along with all apostilled documents from the Israeli parent and directors.

Step 5: Receive Certificate of Incorporation

The MCA issues the Certificate of Incorporation with the company's CIN, PAN, and TAN within 3-7 working days of filing.

Step 6: Open Bank Account and Receive Investment

Open a current account at an Authorised Dealer (AD) bank using the AGILE-PRO-S reference. The Israeli parent then remits the investment amount to this account. The bank issues a Foreign Inward Remittance Certificate (FIRC) upon receipt of funds.

Step 7: Allot Shares and File FC-GPR

The Indian subsidiary allots shares to the Israeli parent at fair market value. Within 30 days of allotment, file Form FC-GPR through the RBI's FIRMS portal. This filing requires the FIRC, KYC documents of the investor, valuation certificate, and board resolution for allotment.

Step 8: Commence Operations

With incorporation complete and foreign investment reported, the subsidiary can commence business operations. Obtain any sector-specific licences, Import Export Code (IEC), or registrations required for the intended business activity.

Timeline and Costs

Setting up a Wholly Owned Subsidiary in India from Israel typically takes 6-8 weeks from start to finish. The timeline can extend if sector-specific licences are required or if document processing encounters delays.

Total professional fees for the entire WOS setup, including legal, CS, and CA charges, typically range from INR 75,000 to INR 1,50,000. Stamp duty on the authorised capital is additional and varies by state. Refer to Beacon Filing's foreign subsidiary registration service for a comprehensive quote.

Post-Registration Compliance

A Wholly Owned Subsidiary in India carries the same compliance obligations as any Private Limited Company, with additional FEMA-related reporting requirements:

• Annual Return (MGT-7A): Filed with the RoC within 60 days of the AGM. See annual compliance services.
• Financial Statements (AOC-4): Filed within 30 days of the AGM.
• Corporate Tax: 22% base rate under Section 115BAA (effective rate ~25.17% with surcharge and cess) for companies opting for the new tax regime.
• GST Returns: Monthly or quarterly GST filings based on turnover thresholds.
• Transfer Pricing: Mandatory for all inter-company transactions with the Israeli parent. Requires maintaining a transfer pricing study and filing Form 3CEB with the tax return.
• Foreign Liabilities and Assets (FLA) Return: Annual return filed with the RBI by 15 July for all companies with foreign investment.
• FEMA compliance: Ongoing reporting through the FIRMS portal for any changes in shareholding, investment structure, or inter-company loans.
• Dividend Repatriation: Dividends declared by the Indian subsidiary to the Israeli parent can be repatriated through the AD bank after deducting applicable withholding tax (10% under DTAA). See dividend repatriation guide.
• Board and AGM: Minimum four board meetings annually, with AGM within six months of financial year-end.

Common Challenges for Israeli Companies

Israeli companies setting up a WOS in India commonly face these challenges:

• Resident director requirement: At least one director must be an Indian resident (182 days in India in the financial year). Israeli companies often use a resident director service or appoint a senior Indian hire to fulfil this requirement.
• Valuation complexity: The mandatory fair market valuation for share allotment requires engaging a SEBI-registered merchant banker or CA, which adds cost and 3-5 days to the timeline. For early-stage subsidiaries with minimal assets, a DCF valuation based on projected cash flows is typically used.
• Banking KYC for foreign-invested companies: Indian banks apply enhanced due diligence for accounts linked to foreign investment, often requesting additional documentation from the Israeli parent. Choosing a bank experienced with FDI accounts (SBI, HDFC, ICICI, or Kotak) reduces friction.
• Transfer pricing scrutiny: Inter-company transactions between the Israeli parent and Indian WOS — including management fees, royalties, cost-sharing agreements, and intra-group services — are subject to detailed transfer pricing analysis. Arm's-length pricing must be documented from day one.
• Intellectual property deployment: Many Israeli companies deploy proprietary technology or IP through the Indian subsidiary. The licensing or assignment must be at arm's-length pricing, with proper withholding tax deducted on royalty payments.
• Hebrew documents: All corporate documents in Hebrew require certified English translations before apostille, adding a layer of preparation that should be factored into the timeline.
• Registered office requirement: The subsidiary must have a physical registered office address in India from the date of incorporation. Many Israeli companies initially use a virtual office or co-working address and transition to a dedicated office as operations scale.

Frequently Asked Questions

Can an Israeli company own 100% of an Indian subsidiary?

Yes. Under India's FDI policy, 100% foreign ownership is permitted in most sectors under the automatic route. Since Israel is not a land-border country, there are no Press Note 3 restrictions. The Israeli parent company can hold all shares of the Indian subsidiary.

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

Structurally, both are Private Limited Companies under the Companies Act, 2013. The key difference is ownership: a WOS has 100% foreign shareholding by a single parent company, while a regular Pvt Ltd may have multiple shareholders, including Indian residents. A WOS also requires additional RBI compliance, including FC-GPR filing and FLA returns.

How is the investment amount transferred from Israel to India?

The Israeli parent company transfers funds through normal banking channels (SWIFT transfer) to the Indian subsidiary's bank account with an Authorised Dealer bank. The bank issues a Foreign Inward Remittance Certificate (FIRC) confirming receipt. Funds must be received within 60 days prior to share allotment, or the subsidiary must refund the amount.

Is there a minimum investment amount for a WOS in India?

There is no statutory minimum investment amount. However, the authorised and paid-up capital should be commensurate with the business plan and projected operations. The RBI and tax authorities may scrutinise thinly capitalised subsidiaries, particularly for transfer pricing purposes.

Can the Israeli parent provide loans to its Indian subsidiary?

Yes, through the External Commercial Borrowings (ECB) framework under FEMA. The loan must comply with the ECB guidelines regarding minimum maturity, all-in cost ceiling, and end-use restrictions. The Indian subsidiary must file Form ECB with the RBI. Interest on such loans is subject to withholding tax at 10% under the India-Israel DTAA.

How long does it take to repatriate profits from the Indian WOS to Israel?

Once the board declares a dividend, the Authorised Dealer bank processes the repatriation within 2-5 business days after deducting withholding tax (10% under DTAA). There is no RBI approval required for dividend repatriation from sectors where FDI is under the automatic route.