What to be checked to issue form 15CB for paying dividend by Subsidiary to Foreign Holding company?
Hi one of the company is making dividend payment to its foreign holding company. The bank is asking for form 15CB by a chartered accountant.
My doubts are:
Other than form 15CB what all documents are to be filed?
Does one require RBI permission to remit the dividend funds outside India?
What are the FEMA rules and regulation applicable to this transaction?
As per Income Tax Act and rules you need to take care of these things:
- File form 15CA, form 15CA is filed as per the details in Form 15CB
- Deduct TDS as applicable
- If you are deducting TDS as per DTAA provisions, make sure subsidiary company have received the TRC (Tax Residancy Certificate) from its holding company.
Remittance of dividend is permitted if the foreign investment was as per the approved scheme.
Dividends are freely repatriable without any restrictions (net after Tax deduction at source or Dividend Distribution Tax, if any, as the case may be), excepting remittance
of dividend requires permission when investment was allowed subject to *dividend balancing condition.
So, we need to check whether original investment was subject to dividend balancing condition, if not, there are no restrictions.
The rate of dividend on preference shares or convertible preference shares issued under Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000 shall not exceed 300 basis points over the Prime Lending Rate of State Bank of India prevailing as on the date of the Board meeting of the company in which issue of such shares is recommended.
Interalia, complying the provisions of Companies Act, 1945, Indian companies intending to remit dividend to their non-resident shareholders should make an application to an authorised dealer in Form RCD 1, supported by the particulars of non-resident shareholding in form RCD 2 and other documents prescribed in the form. In case of Interim Dividend application may be made by the company in India to the authorised dealer by letter (in duplicate) enclosing only the form RCD 2 and a copy of the Board Resolution approving the payment of interim dividend.
Main documents involved are:
• RCD 1
• RCD 2
• Board Resolution
As Indian companies are required to remit dividend to all their non-resident shareholders through the normal banking channels, it is not necessary for them to prepare individual dividend warrants for despatch to such non-resident shareholders. [However, dividends due to non-resident shareholders who are not eligible for having the amounts remitted to them abroad or those who wish to have the dividend paid in India for credit to their non-resident accounts, may be paid by issuing individual dividend warrants to their mandatee bankers in India for credit to their Ordinary Nonresident
Rupee (NRO) accounts. In cases where dividend is to be credited to NRO accounts of the non-resident investors, there is no need to follow the procedure in above para.]