For an entrepreneur to pivot their business models and explore untapped opportunities, funding becomes the inevitable step. Apart from choosing the right entity for registering your startup business and going through the cumbersome process of following the various regulatory compliance’s, getting your startup funded is an important aspect that needs significant time and effort.
For a Startup registered as a private limited company in India, there are certain compliance requirements laid down by the Companies Act, 2013 and other regulatory bodies that need to followed and adhered to from time to time. Failure to adhere to such regulations would lead the startup to penalties that could severely damage your business and harm the reputation that you have worked so hard for. Keeping this in mind, we have curated an annual compliance checklist for startups in India.
In our previous blog post, we spoke about the Pre-Funding compliance requirements and due diligence that needs to be adhered to for Startups registered in India. Today we will be discussing the Post-Funding compliance checklist for Startups that includes the guidelines set by the Reserve Bank of India for startups raising funds from investors outside India.
Typically, most modern startups today seek some sort of funding after they’ve been set up. While we have huge respect for companies that bootstrap, raising funds from investors has become quite common these days and often a necessity as well. But in most cases, startup founders are so involved in the process of raising funds that they forget to look at the mandatory compliances and due-diligence processes that are involved before and after fundraising. Today we’ll take a look at the pre-funding compliance checklist for startups in India.
Rules applying to IGST for advertisement services were amended recently via notification dated 15 November 2017. The guidelines state the criteria for allocating the IGST to various States/Union Territories in case of the advertisement services are supplied either to the Central/ State Government, a local authority or even a statutory body as per Section 12(14) of the IGST Act, 2017.
These criteria are applicable in case of no contract between the recipient and the supplier regarding the amount to be to be mentioned on the invoice. Here is a brief below of the major pointers issued as amendments to help you grasp the gist quite quickly.
Every service provider in India is aware of service tax and many have at some point dealt with a penalty for late filing of service tax return. For those who are not aware, service tax is an indirect tax that is levied on the services provided by any service provider. Consumers are responsible for paying this service tax which is included in the invoice, and service providers are responsible for collecting it and paying it through the service tax return.
Previously we discussed the parameters of determining a company to be considered as engaged in “active business outside India” and the POEM guidance associated with it. Today we talk about the guidelines for those companies that are not engaged in active business outside India.
POEM Guidance for companies not engaged in active business outside India
For companies not engaged in active business outside India, a two-stage process for the determination of Place of Effective Management is provided as follows:
In our previous post, we discussed the idea of Place of Effective Management and how it came into existence. Today we will be focusing on the POEM guidance for companies that are engaged in active business outside India.
Determination of “active business outside India”
A company shall be considered as engaged in “active business outside India” if the passive income is not more than 50% of its total income; and if the following conditions are met –
The idea of Place of Effective Management or POEM was first introduced in the Finance Act 2015 for the purpose of determining the residential status of foreign businesses. As per the act, any business having its place of effective management in India will be considered as an Indian resident and accordingly, it’s global income will be taxable in India.17
But the Finance Act was missing the entire criteria and process for determining the place of effective management. For this purpose, the Central Board of Direct Taxes (CBDT) introduced the Guiding Principles for determination of Place of Effective Management (POEM) of a Company.
You have always dreamt of starting a business of your own and finally, you got the right business idea which you are very enthusiastic and pumped up about. What’s the next step after this? What do all successful entrepreneurs have in common that makes them turn their small startup businesses into multi-million dollar companies? Well, one common advice that all these entrepreneurs would suggest is to have a sound financial plan for your business.
Planning is bringing the future into the present so that you can do something about it now.