Information required regarding new business set up

Information required regarding new business set up

Hi,

I'm a person of Indian origin based in Sydney, holding foreign citizenship and Overseas Citizenship of India (OCI) card.

I'm planning to start an education/visa services consultancy in India in (50/50) partnership with my friend based in India. We will be registering a partnership firm in India and we will be using the trading name of another immigration firm based in Sydney as we will be signing an MOU/franchise agreement with this firm. Basically, we will be using their name, their tools, and resources, their system to login applications and we will be paid commissions after the student gets his/her visa. The India address will be also be displayed on their website as one of their location in India but it will not be their own branch as we will be signing an MOU/franchise agreement.

Once the student gets a visa, the immigration firm in Sydney will transfer the commission directly to our partnership bank account in India.

My first question is whether we (partnership firm) or the immigration firm in Sydney will need to register in FEMA as our partnership firm will be using the other immigration firm's trading name.

My second question is whether I can transfer 50% of my commission earned from our partnership bank account to my NRE account and repatriate the money to Sydney. If yes, what are the tax obligations; will I have to pay tax both in India and Australia.

If I cannot repatriate my money, can you advise the alternate option of setting up this business?

Thanks,
Vijay

Asked 5 years ago in Service Tax

Hi,

If it's just an MOU between indian firm and Sydney firm and Sydney firm is not investing in Indian firm, then no registration under FEMA is required.

You can repatriate your profit once it is taxed in India and after filing form 15CA.

Lakshita Bhandari

CA, Mumbai

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Thanks, Lakshita.

The MOU agreement states the below paragraph and it does mention franchise word. see below paragraph. Will there be any issues/concern if ''franchise' word is used in the agreement. Also, the Sydney firm will not be investing in Indian Firm. Please advise.

" This Memorandum of Understanding (MOU) sets for the following terms and understanding between the Sydney Firm (Party A) and the Indian Firm (Party B) to work together for Australian Education and Visa services as a franchise of the Sydney firm (Party A)."

Thanks,
Vijay

Asked 5 years ago

Since you would be earning the commission for services provided in India therefore you need to pay tax for same in India and once you do that you can repatriate the amount out of India.

Naman Maloo

CA, Jaipur

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Hi Vijay,

As you will operate from India through a partnership deed and have a physical office in India, below are the implications and compliances.

a) Draft a proper partnership deed and it is advised to get it registered.

b) Apply for PAN

c) Services provided by you to the Australian company falls under the definition of export of services under GST. Once the commission income crosses the threshold limit of Rs. 20 lacs during the Financial year, you are required to register for GST.

d) Proper maintenance of books of accounts.

e) Tax Audit, if required.

f) No need for registration under FEMA

g) As you will be a partner in partnership, you can withdraw salary, interest on capital or capital.

h) Yes you can repatriate the amount outside after filing of Form 15Cb and Form 15CA,

Thanks

Vivek Kumar Arora

CA, Delhi

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Hi Vijay,

I don't think it will gonna create any problem from tax perspective.

However, the taxability of money received from students and payment made by Indian company to foreign company needs to be evaluated in detail in light of all the facts.

Lakshita Bhandari

CA, Mumbai

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