How to setup ODC in India

Betazed · Post by **Betazed** » Wed Jul 04, 2007 7:38 pm

Does anyone know what is the procedure to setup an ODC in India? How long it takes etc? What is the cost breakup and how much will it cost per annum (Approx 5 developers). I am thinking of doing it in Kolkata since my folks live there.

tejasvee · Post by **tejasvee** » Thu Jul 05, 2007 6:48 am

Betazed;32332Does anyone know what is the procedure to setup an ODC in India? How long it takes etc? What is the cost breakup and how much will it cost per annum (Approx 5 developers). I am thinking of doing it in Kolkata since my folks live there.[/quote]

For a center of just 5 developers, you are better off working with an incubating firm that takes care of everything for you in terms of infrastructure.

http://www.12foundations.com/incubation.php

manojsamuel · Post by **manojsamuel** » Mon Aug 20, 2007 10:00 am

Hi

Let me know if I could help you in deciding. Few things that you need to make sure is

1) First and foremost is the team
2) Then the client references
3) Existing Projects
4) Since it is a small Team that you are looking for , how transparent their process is.
5) Quality standards that they follow.

Let me know if I could help you evaluate any company.

Regards

Manoj Samuel

jete_pari · Post by **jete_pari** » Sat Nov 24, 2007 7:42 pm

The company I work for has setup a ODC in Kolkata and has about 8 people now. We started with 2 person in an attic in 2003.
The cost is really miminal. I can provide more details, if you are interested.
Send a pm to me.

HighTorque · Post by **HighTorque** » Sat Nov 24, 2007 8:01 pm

Setting up ODC is not difficult but to what I hear from somepeople in India is the retention of talent. Small service model companies have a hard time finding employable labor and even the freshers who are not hired by the big wigs are mostly unemployable in terms of skills and leave in a yr or so after getting some experience. Unless you are the next google in the making or have potential to be bought out by some big fish, labor problem will be a stark reality, something to keep in mind.

vizagdesi · Post by **vizagdesi** » Sun Nov 25, 2007 10:18 pm

jete_pari;59645The company I work for has setup a ODC in Kolkata and has about 8 people now. We started with 2 person in an attic in 2003.
The cost is really miminal. I can provide more details, if you are interested.
Send a pm to me.[/quote]

I am interested to know how the mechanics work in terms of registering the local company in India and how to fund it with USD and then how to get the tax benefits.

I am about to start a 2-man company in India and provide services to a very large Fortune 20 company in the US. The US MNC client is giving contract to my US company (a small S Corp) but all the work will be done from India. This is not exactly a software development center but more like a Finance BPO center.

Here is how I am thinking of making it to work:

1. My US Company bills my US Client
2. US Client pays to US Company
3. My India Company bills my US Company
4. US Company pays India Company
5. India Company shows revenue as Export Services Revenue
6. Assuming that there is a tax holiday for exported services revenue, my tax bill in India will be very minimal or none.

First, is that assumption (in item 6 above) correct?. If so, what needs to be done to make it happen?

Thanks for all your support

dhindia · Post by **dhindia** » Mon Nov 26, 2007 4:07 am

I think you have to get STPI registration to classify as an export house. From my experience what i would suggest is that instead of trying to find out how to set up an ODC, hire a CPA/Company secretary who knows it and ask him to explain the process step by step to you.

That approach is muuch easier and productive.

back_in_des · Post by **back_in_des** » Tue Nov 27, 2007 11:29 am

vizagdesi;59829I am interested to know how the mechanics work in terms of registering the local company in India and how to fund it with USD and then how to get the tax benefits.

I am about to start a 2-man company in India and provide services to a very large Fortune 20 company in the US. The US MNC client is giving contract to my US company (a small S Corp) but all the work will be done from India. This is not exactly a software development center but more like a Finance BPO center.

Here is how I am thinking of making it to work:

1. My US Company bills my US Client
2. US Client pays to US Company
3. My India Company bills my US Company
4. US Company pays India Company
5. India Company shows revenue as Export Services Revenue
6. Assuming that there is a tax holiday for exported services revenue, my tax bill in India will be very minimal or none.

First, is that assumption (in item 6 above) correct?. If so, what needs to be done to make it happen?

Thanks for all your support

What you've described above should work. The thing to keep in mind is, you need to be registered with STPI for tax holiday. To be registered with STPI, you need to show projections of positive NFE (Net Foreign Exchange) over 5 years. If the amount is not substantial, STPI may reject your application. Consult a CA, consultant or law-firm that specializes in STPI approvals process.

Second thing to keep in mind is, tax holiday is only until 2009. It expires in 2009. There is all likelihood of govt extending it beyond that, but be prepared if it doesn't.

Third thing is, your pricing. You need to show your pricing to STPI. It should be arm-length pricing, i.e. it should not be a cozy arrangement between your US company and your Indian company to not have profits in India (even if there is a tax holiday). This arm-length pricing is a requirement of Income Tax dept (not STPI). So, even if you don't go for STPI status, you still need to do arm-length pricing.

more later.

vizagdesi · Post by **vizagdesi** » Tue Nov 27, 2007 7:12 pm

back_in_des;60185What you've described above should work. The thing to keep in mind is, you need to be registered with STPI for tax holiday. To be registered with STPI, you need to show projections of positive NFE (Net Foreign Exchange) over 5 years. If the amount is not substantial, STPI may reject your application. Consult a CA, consultant or law-firm that specializes in STPI approvals process.

Second thing to keep in mind is, tax holiday is only until 2009. It expires in 2009. There is all likelihood of govt extending it beyond that, but be prepared if it doesn't.

Third thing is, your pricing. You need to show your pricing to STPI. It should be arm-length pricing, i.e. it should not be a cozy arrangement between your US company and your Indian company to not have profits in India (even if there is a tax holiday). This arm-length pricing is a requirement of Income Tax dept (not STPI). So, even if you don't go for STPI status, you still need to do arm-length pricing.

more later.[/quote]

Thank you very much for all your help. Do you know of any good CA/Law firm that can help me in setting up this in India (preferably Hyd?)

back_in_des · Post by **back_in_des** » Wed Nov 28, 2007 12:07 am

vizagdesi;60250Thank you very much for all your help. Do you know of any good CA/Law firm that can help me in setting up this in India (preferably Hyd?)

Please check your PM.

Continuing my thought on your original proposal:

Why do you want your US office in the middle? Do your US clients prefer it that way?

your US office would be liable for taxes on the income received.

Your Indian company can directly enter into MSA (master services agreement) with your US clients and they can wire the funds into your account in India based on the invoice you raise.

While a lot of companies have fixed hourly rates, typical subsidiary companies have cost-plus model. essentially the Indian subsidiary bills it's US parent or US client an invoice that is equal to the operational cost in the past month plus a profit margin as determined by the transfer pricing study. transfer pricing is a study done by CAs to determine what is the profit margin you should be using to be at arm's-length from your US-parent/client.