Introduction: India’s Growing Investment Appeal for Japanese Enterprises
As Asia’s fastest-growing major economy, India continues to attract global investment, particularly from Japan, which shares a long-standing diplomatic and trade partnership with the country. With India’s emphasis on ease of doing business, the expansion of infrastructure under initiatives like “Make in India,” and the availability of a cost-effective, skilled workforce, it’s no surprise that Japanese businesses are increasingly looking toward India as a preferred destination for investment. For businesses eyeing market expansion, setting up a company in India represents a strategic and scalable decision. KNM India, with its expertise in cross-border advisory and compliance services, serves as a trusted partner for Japanese businesses in this journey.
Entry Structures for Japanese Companies in India
Before establishing operations, Japanese investors must assess the appropriate structure for their business. India allows several modes of entry, such as setting up a Wholly Owned Subsidiary (WOS), forming a Joint Venture (JV) with Indian partners, or opening a Liaison Office or Branch Office. Each structure varies in terms of control, liability, tax exposure, and regulatory obligations. For example, a WOS offers full control and is ideal for companies seeking long-term presence, while JVs may benefit from local partnerships and shared risks. Liaison and branch offices, on the other hand, offer limited functions and are suited for businesses in the exploratory or coordination phase. KNM India helps foreign companies evaluate and adopt the most beneficial structure based on their strategic goals.
Legal Procedures and Regulatory Approvals
The process of setting up a company in India involves multiple statutory steps governed by the Ministry of Corporate Affairs (MCA) and the Reserve Bank of India (RBI). The journey begins with name reservation through the RUN (Reserve Unique Name) facility, followed by entity incorporation using the SPICe+ form. Foreign investors must obtain a Permanent Account Number (PAN), Tax Deduction and Collection Account Number (TAN), and register under the Goods and Services Tax (GST), depending on business activities. Under FEMA guidelines, inward foreign investment may fall under the automatic route or require government approval. Reporting requirements like the submission of Form FC-GPR (for capital inflows) and FLA returns are essential. KNM assists clients in managing all legal paperwork, regulatory filings, and interface with authorities.
Taxation, Transfer Pricing & Accounting Norms
India’s corporate tax regime is investor-friendly, with the effective rate for new domestic companies at 22% (plus surcharge and cess), provided they do not claim exemptions. Japanese businesses must also understand the implications of withholding taxes on royalty, interest, and technical services, which could be mitigated through the India-Japan Double Taxation Avoidance Agreement (DTAA). Given the prevalence of cross-border transactions, transfer pricing regulations require companies to adhere to the arm’s length principle and maintain contemporaneous documentation. Additionally, companies must align with Indian Accounting Standards (Ind AS), undergo statutory audits, and maintain proper books of accounts. KNM provides comprehensive tax structuring, TP documentation, and accounting support that complies with Indian regulations.
Employment, Labour & ESG Compliance
Navigating India’s employment laws is critical to long-term success. Businesses must comply with statutes like the Shops and Establishment Act, Employees’ Provident Fund (EPF), Employee State Insurance (ESI), and the Gratuity Act. The implementation of India’s new Labour Codes further streamlines compliance, though it requires careful assessment by foreign investors. Increasingly, global companies are also expected to adopt Environmental, Social and Governance (ESG) frameworks. KNM helps Japanese companies comply with evolving labour laws, design payroll structures, and integrate ESG reporting practices into their operations—ensuring both legal compliance and responsible business conduct.
How KNM India Supports Japanese Companies with Seamless Market Entry
As a trusted advisor to global firms, KNM India provides end-to-end solutions for Japanese businesses entering the Indian market. Our services encompass market entry strategy, entity structuring, legal incorporation, and tax registration. Post-setup, we manage compliance calendars, regulatory filings, and statutory audits. We also represent clients before authorities such as the MCA, GST departments, RBI, and income tax authorities. With Japanese-speaking professionals and a strong understanding of cross-cultural business needs, KNM ensures seamless operations, clear reporting, and long-term strategic support. Whether it’s accounting, HR compliance, or ESG integration, KNM stands as a one-stop partner for sustainable business growth in India.
Conclusion
Setting up a company in India offers immense potential for Japanese businesses looking to scale in Asia’s largest democratic market. However, to capitalize on the opportunity, businesses must be equipped with the right legal, regulatory, and financial knowledge. KNM India brings decades of international advisory experience, offering tailored services to ensure smooth and compliant market entry. From business structure selection to ongoing support, KNM is committed to enabling Japanese companies to succeed confidently in India’s dynamic business environment.
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