Facts
- Mr. A is an Indian resident.
- He owns a sole proprietary firm in India.
- He opened a branch office in Los Angeles, holding 55% ownership in partnership with a local company.
- Mr. A controls the branch office in Los Angeles.
What does FEMA say?
- Under FEMA, a person resident in India includes: (d) an office, branch, or agency outside India owned or controlled by a person resident in India.
- The terms “owned” and “controlled” are defined (per FDI Policy 2020 and NDI Rules 2019) as:
- Owned: More than 50% of capital beneficially owned by resident Indian citizens/Indian companies owned and controlled by resident Indian citizens.
- Control: Right to appoint majority of directors or control management or policy decisions (by shareholding, agreements, voting rights).
Application to Mr. John’s case
- Mr. A, an Indian resident, owns 55% share in the branch office in Los Angeles.
- He exercises control over management/decisions (due to majority ownership).
- Therefore, this branch office outside India is owned and controlled by a resident Indian.
Conclusion
- As per FEMA, the branch office located in Los Angeles controlled and majority-owned by Mr. A will be deemed a resident in India for the purposes of FEMA.
- This means, for legal compliance under FEMA, the branch office is treated as a resident entity in India despite being physically outside India.
Summary Table
| Situation | Residential Status under FEMA |
|---|---|
| Office/Branch outside India owned or controlled by Resident in India | Deemed Resident in India |
If you want, I can help you with implications of this status or further compliance requirements related to such branches.
