India Market Entry for Canadian Companies
Structure, treaty and repatriation points for Canadian parents and investors entering India.
Canadian companies and institutions invest in India across technology, infrastructure, financial services, mining services and education, and Canadian pension funds are among the larger long-term investors in Indian infrastructure and financial assets. A Canadian parent's first questions concern the India-Canada tax treaty, how the Indian subsidiary fits into Canadian foreign-affiliate rules, and how to move cash back efficiently.
Treaty and withholding
The India-Canada treaty reduces India's withholding tax on dividends, interest, royalties and fees for included services paid to a Canadian resident. The rates depend on the holding and on what is being paid for, so confirm them in the treaty text and Indian notifications before applying one.
The India-Canada double taxation treaty reduces India's withholding tax on dividends, interest, royalties and fees for included services paid to a Canadian resident. Dividends are taxed at a lower rate where the Canadian company holds at least a stated percentage of the Indian company and at a higher rate otherwise, and royalties and technical fees fall in a range that depends on what is being paid for. Because the rates depend on the holding and the contract, confirm them in the treaty text and in Indian notifications before applying one. India's default rate for dividends, royalties and technical fees to non-residents is 20 per cent before surcharge and cess. Relief needs a Canadian Tax Residency Certificate, Form 10F, beneficial ownership and clearance of India's anti-avoidance tests.
Structure and FDI
Most Canadian operating companies form an Indian private limited company wholly owned by the Canadian parent or a holding company. The inflow is reported within 30 days of allotment, two directors are needed with one resident in India, and software firms often build a global capability centre.
Most Canadian operating companies form an Indian Private Limited company wholly owned by the Canadian parent or by a Canadian holding company. The inflow is reported on Form FC-GPR within 30 days of allotment, and the entity needs two directors, one resident in India. Canadian software and services businesses frequently build a Global Capability Centre in India, and businesses testing the market can use an Employer of Record first. Our comparison of liaison office, branch and subsidiary helps you choose.
Getting money back to Canada
Dividends can be paid out of profits after Indian tax, at the withholding rate that applies, and loans from the Canadian parent follow India's external commercial borrowing rules. Canadian foreign-affiliate rules decide how the subsidiary's income is taxed in Canada, so plan profit extraction with advisers on both sides.
Dividends can be paid out of profits after Indian tax, subject to the withholding rate that applies, and loans from the Canadian parent follow India's external commercial borrowing rules. Royalty and service-fee payments need transfer pricing support. Canadian rules on foreign affiliates determine how the Indian subsidiary's income is taxed in Canada, so plan the Indian profit extraction with your Canadian advisers. Our treasury and FX service and international tax team work through both sides.
Frequently asked questions
Do Canadian pension funds get special treatment in India? India has tax provisions for certain sovereign and pension investors in infrastructure and similar assets, with conditions. If you are an institutional investor, take advice on eligibility before investing.
Is there a 100% foreign ownership route for Canadian companies? In most sectors, yes, under the automatic route. Some sectors have caps or need approval, so check the FDI policy for your activity.
Can we run payroll in India without an entity? Through an Employer of Record, yes. That also handles statutory benefits and filings.
What documents prove Canadian residency for the treaty? A Tax Residency Certificate from the Canada Revenue Agency and Form 10F, given to the Indian payer before treaty rates are applied.