Set Up a Wholly Owned Subsidiary in India from Romania

How to Register a Wholly Owned Subsidiary in India from Romania

A Wholly Owned Subsidiary (WOS) allows a Romanian parent company to own 100% of the shares in an Indian entity while maintaining full operational and strategic control. The Indian subsidiary is incorporated as a Private Limited Company under the Companies Act 2013, with the Romanian parent company holding the entire shareholding. This structure provides complete ownership, limited liability (the parent's liability is limited to its investment in the subsidiary), and the benefits of being treated as a domestic company for Indian tax purposes.

India and Romania have maintained diplomatic relations since 1948, with bilateral trade nearing US$3 billion. Indian investment in Romania is estimated at US$1.5 billion, spanning sectors including IT, pharmaceuticals, and manufacturing. In February 2024, the two countries marked the 10th anniversary of the India-Romania Extensive Partnership with a Joint Declaration. For Romanian companies seeking full control over their Indian operations, a WOS is the preferred structure. It allows any lawful business activity, provides domestic tax rates, and offers the flexibility to raise capital, enter joint ventures, or pursue acquisitions within India. For entity comparisons, see Branch Office vs Subsidiary and Private Limited vs LLP.

FDI Route and Regulatory Requirements

Romanian companies can establish a WOS in India under the automatic route for most sectors where 100% FDI is permitted. No prior approval from the RBI or the Government of India is required. The Romanian parent company simply incorporates the Indian subsidiary, infuses capital through banking channels, and files Form FC-GPR within 30 days of share allotment.

Key Regulatory Points

• FDI route: Automatic in most sectors (IT, manufacturing, services, infrastructure, e-commerce marketplace)
• Ownership: 100% foreign ownership by the Romanian parent company
• Minimum capital: No statutory minimum paid-up capital requirement, though the authorised capital should reflect the planned scale of operations
• Directors: Minimum 2 directors required, of which at least 1 must be a resident of India (stayed in India for at least 182 days during the financial year, per Section 149(3) of the Companies Act 2013)
• Board resolution: The Romanian parent company must pass a board resolution authorising the incorporation of the Indian subsidiary and the quantum of investment

Since Romania does not share a land border with India, Press Note 3 (2020) restrictions do not apply. Romanian companies can invest freely without additional government security clearances. However, certain sectors have FDI caps: multi-brand retail (51%), banking (74%), insurance (100% with conditions), and defence (74% under automatic route, 100% with government approval). See Automatic Route vs Government Approval.

DTAA Benefits for Romanian Companies

The Double Taxation Avoidance Agreement between India and Romania provides substantial tax benefits for Romanian parent companies operating through a WOS in India. The original treaty was signed in 1987, and a revised convention was signed on 8 March 2013:

• Dividends: Capped at 10% withholding tax in the source country, with no minimum shareholding condition (compared to 20% under domestic law without the DTAA)
• Interest: Capped at 10% withholding tax on intercompany loans and financial arrangements (interest paid to the Government, a political subdivision, or a local authority is exempt)
• Royalties: Capped at 10% for technology transfers, brand licensing, and intellectual property payments
• Fees for technical services: Capped at 10% for management and consultancy fees
• Capital gains: Governed by treaty provisions with specific rules for immovable property transfers

The Indian WOS is taxed as a domestic company at 22% under Section 115BAA (effective rate 25.17%). The lower 15% rate (effective rate 17.16%) under Section 115BAB was only available to new manufacturing companies that commenced manufacturing by 31 March 2024; that window has now closed, so newly incorporated manufacturers fall under the 22% (115BAA) rate. This is still a significant advantage over a Branch Office, which is taxed at 35% as a foreign company. Romanian parent companies should obtain a Tax Residency Certificate from ANAF (Romania's National Agency for Fiscal Administration) and file Form 10F in India to claim DTAA benefits. See our DTAA Master Guide for detailed procedures.

Document Requirements and Authentication

Romania is a party to the Hague Apostille Convention, which entered into force for Romania on 16 March 2001. Romanian documents require an apostille from the competent Romanian authority — the Prefect's Office (Institutia Prefectului) for administrative documents such as Trade Register extracts, a Chamber of Notaries Public for notarised documents, and the county tribunal (Tribunalul) or the Bucharest Court for court-issued documents — which simplifies the authentication process significantly compared to embassy attestation. See Apostille vs Embassy Attestation.

Documents Required from the Romanian Parent Company

• Certificate of Incorporation (Certificat de inregistrare) of the Romanian parent company (apostilled)
• Memorandum and Articles of Association (Act constitutiv) or equivalent charter document (apostilled, with certified English translation)
• Board resolution of the Romanian parent company authorising the establishment of the Indian subsidiary and the quantum of investment
• Details of the parent company's business activities and financial position
• Passport copies of all proposed directors from Romania (notarised and apostilled)
• Address proof of Romanian directors (utility bill or bank statement, apostilled)
• Latest audited financial statements of the Romanian parent company (apostilled)

Documents Prepared in India

• SPICe+ (INC-32) form filed on the MCA portal
• Memorandum of Association (MoA) and Articles of Association (AoA) of the Indian subsidiary
• Digital Signature Certificate (DSC) for all proposed directors
• Declaration by first directors and subscribers (INC-9)
• Proof of registered office address (rent agreement + NOC from landlord + utility bill)

Step-by-Step Registration Process

The incorporation of a WOS in India follows the same SPICe+ process as a standard Private Limited Company, with additional FDI reporting requirements.

Step 1: Board Resolution and Investment Approval

The Romanian parent company's board of directors passes a resolution authorising the establishment of an Indian subsidiary, specifying the amount of investment and the proposed business activities. This resolution must be apostilled for submission to Indian authorities.

Step 2: Obtain DSC and Prepare Documents

Procure Digital Signature Certificates for all proposed directors (both Romanian and Indian resident directors). Simultaneously, apostille all Romanian documents through the competent authority (Prefect's Office, Chamber of Notaries Public, or county tribunal, depending on the document type) and arrange certified English translations. Timeline: 1-3 weeks.

Step 3: Reserve Company Name and File SPICe+

Reserve the company name through Part A of the SPICe+ form on the MCA portal (the RUN service is now used only for changing the name of an existing company). File the SPICe+ (INC-32) form with MoA, AoA, and all supporting documents. The SPICe+ form simultaneously applies for PAN, TAN, EPFO, ESIC, and professional tax registration. Timeline: 5-10 working days.

Step 4: Receive Certificate of Incorporation

The ROC issues the Certificate of Incorporation with PAN and TAN. The Indian subsidiary is now legally constituted. The Romanian parent company is recorded as the sole shareholder in the company's register of members.

Step 5: Open Bank Account and Infuse Capital

Open a current account with an Indian bank (AD Category-I bank). The Romanian parent company remits the subscription amount and initial capital through banking channels. The bank conducts comprehensive KYC checks on the Romanian parent company, including verification of beneficial ownership and source of funds.

Step 6: Allot Shares and File FC-GPR

Allot shares to the Romanian parent company. Within 30 days, file Form FC-GPR with the RBI through the AD bank, reporting the FDI inflow, share allotment details, and valuation. The valuation must be certified by a SEBI-registered merchant banker or a practising Chartered Accountant.

Step 7: Commence Business Operations

Before commencing business or exercising borrowing powers, the company must file Form INC-20A (declaration of commencement of business) with the ROC within 180 days of incorporation, confirming that every subscriber has paid the subscription money. With the Certificate of Incorporation, bank account, INC-20A and FDI reporting completed, the WOS can commence business operations. Apply for any additional registrations required (GST, import-export code, shop and establishment registration, etc.).

Timeline and Costs

The end-to-end timeline for establishing a WOS in India from Romania is approximately 4-8 weeks:

Cost Breakdown

• Government fees (MCA): INR 2,000-15,000 (depends on authorised capital)
• Stamp duty: INR 5,000-25,000 (varies by state)
• DSC: INR 1,500-3,000 per director
• Professional fees (CS/CA): INR 25,000-75,000 (includes MCA filing, RBI compliance)
• Valuation certificate (for FC-GPR): INR 10,000-25,000
• Apostille charges in Romania: No fee at the Prefect's Office for administrative documents; approximately RON 20 per document at a county tribunal and RON 59.50 per document at a Chamber of Notaries Public
• Certified translations: RON 30-50 per page
• Total estimated cost: INR 50,000-1,50,000 plus apostille and translation costs

Post-Registration Compliance

A WOS in India must meet the same compliance requirements as any domestic Private Limited Company, plus additional FEMA reporting:

• Board meetings: Minimum 4 per year, with not more than 120 days between consecutive meetings
• Annual General Meeting: Within 6 months from the close of the financial year (31 March)
• ROC filings: Form AOC-4 (financial statements) and MGT-7 (annual return)
• Income tax return: Filed annually; tax rate of 22% under Section 115BAA (the 15% Section 115BAB rate for new manufacturers applied only to companies that commenced manufacturing by 31 March 2024, and that window has since closed)
• Foreign Liabilities and Assets (FLA) return: Filed by the Indian WOS with the RBI on the FLAIR portal by 15 July each year, reporting foreign investment received and held (the Annual Performance Report is a separate filing that applies to Indian companies investing overseas, not to inbound FDI)
• Transfer pricing: Mandatory transfer pricing documentation and compliance for all transactions between the WOS and the Romanian parent company, including management fees, royalties, loans, and intercompany trade
• GST compliance: Monthly or quarterly returns if the WOS is GST-registered
• Statutory audit: Mandatory annual audit by a practising Chartered Accountant

Beacon Filing provides comprehensive annual compliance, FEMA/RBI compliance, corporate tax filing, and FDI advisory services for WOS entities.

Common Challenges for Romanian Companies

Resident Director Appointment

At least one director must be an Indian resident (182+ days of stay in India during the financial year, per Section 149(3) of the Companies Act 2013). Romanian parent companies that do not have an employee or trusted contact in India often appoint a professional nominee director. While legally permissible, this approach requires careful governance controls: the shareholder agreement should clearly delineate the Romanian parent's control rights, and the nominee director's scope of authority should be tightly defined through a board resolution.

Valuation for FC-GPR Filing

The shares allotted to the Romanian parent company must be valued at fair market value as certified by a SEBI-registered merchant banker or practising Chartered Accountant using internationally accepted valuation methodologies (DCF being the most common). For a new company with no operating history, the valuation is typically based on the net asset method, which reflects the face value of shares plus any premium. Ensuring the valuation report is properly prepared is critical to avoid RBI queries and delays in FC-GPR processing.

Transfer Pricing Documentation

All intercompany transactions between the Indian WOS and the Romanian parent (management fees, royalties, cost-sharing arrangements, intercompany loans, procurement) must comply with Indian transfer pricing regulations. The transactions must be at arm's length, documented in a transfer pricing report, and reported in the annual tax return. Non-compliance can attract penalties of 100-300% of the tax sought to be evaded. See Transfer Pricing Services.

Romanian Financial Year vs Indian Financial Year

Romania follows a calendar financial year (January to December), while India uses April to March. This creates complexities in financial consolidation, intercompany reconciliation, and reporting. The Indian WOS will report on the April-March cycle, requiring the Romanian parent to adjust consolidation schedules. Multi-currency transactions between RON and INR add further complexity to intercompany accounting.

Thin Capitalisation and Debt-Equity Considerations

While India does not have a strict thin capitalisation rule, the Interest Limitation Rule under Section 94B of the Income Tax Act limits the deduction of interest paid to associated enterprises to 30% of EBITDA for interest exceeding INR 1 crore. Romanian parent companies planning to fund the Indian WOS through intercompany loans should carefully structure the debt-equity ratio to optimise tax efficiency while complying with FEMA regulations on External Commercial Borrowings (ECB).

Frequently Asked Questions

Can a Romanian company own 100% of an Indian subsidiary?

Yes. In sectors where 100% FDI is permitted under the automatic route, a Romanian company can own the entire shareholding of an Indian Private Limited Company, making it a Wholly Owned Subsidiary. No prior government approval is required.

What is the difference between a WOS and a Joint Venture in India?

In a WOS, the Romanian parent company owns 100% of the shares. In a Joint Venture, the Romanian company partners with an Indian entity, sharing ownership and control. A WOS provides full autonomy, while a JV leverages the Indian partner's local market knowledge, distribution network, and regulatory relationships.

How is a WOS taxed compared to a Branch Office?

A WOS is taxed as a domestic company at 22% (effective rate 25.17% under Section 115BAA), compared to 35% (effective rate 38.22%) for a Branch Office. A lower 15% rate (effective 17.16%) under Section 115BAB applied to new manufacturing companies that commenced manufacturing by 31 March 2024, but that window has now closed, so new manufacturers fall under the 22% (115BAA) rate. The tax advantage over a Branch Office alone often justifies the additional incorporation costs.

What is the FC-GPR filing deadline?

Form FC-GPR must be filed with the RBI through the AD bank within 30 days of allotment of shares to the Romanian parent company. Delayed filing can normally be regularised by paying a Late Submission Fee (LSF) under the RBI framework. Unresolved default attracts penalties under Section 13 of FEMA of up to three times the sum involved where the amount is quantifiable, or up to INR 2 lakh where it is not, plus up to INR 5,000 per day for as long as the contravention continues.

Can the WOS borrow from the Romanian parent company?

Yes, through the External Commercial Borrowing (ECB) route regulated by the RBI. The loan must comply with FEMA regulations regarding minimum tenure, maximum interest rate (benchmark rate plus spread), and end-use restrictions. The interest paid is subject to 10% withholding tax under the India-Romania DTAA.

Does the WOS need a separate GST registration?

GST registration is required once aggregate turnover crosses INR 20 lakh for a supplier of services (INR 10 lakh in special category states) or INR 40 lakh for a supplier of goods (INR 20 lakh in special category states). Registration is also compulsory regardless of turnover for inter-state supplies of goods and for exporters claiming refunds. Most foreign-invested companies providing services in India will need GST registration.

Can the Romanian parent repatriate profits from the Indian WOS?

Yes. Dividends can be freely repatriated to the Romanian parent company after paying the applicable withholding tax (10% under the India-Romania DTAA, against 20% plus surcharge and cess under domestic law). File Form 15CA/15CB before each dividend remittance and ensure a valid Tax Residency Certificate from Romania is on file with the Indian company.