Most problems for Chinese companies in India come from sequence and disclosure: investing before the government approval, relying on a third-country vehicle that does not hide Chinese ownership, using an apostille that India does not accept for Chinese documents, sending people on the wrong visa, or keeping thin records. The list below groups the common ones by area, with the fix for each.
← Back to the complete guide: How to Set Up a Subsidiary in India from China
Key facts
| Approval | Remitting or incorporating before Press Note 3 approval |
|---|---|
| Ownership | A Hong Kong or Singapore vehicle used to hide Chinese beneficial ownership |
| Documents | Chinese documents apostilled instead of notarised, authenticated and attested |
| FEMA | Late allotment (60 days) or late FC-GPR (30 days after allotment); missed FLA return |
| Treaty relief | No Chinese tax residence certificate or Form 41 before the first dividend |
| Visas | Engineers on business visas doing hands-on work |
| Records | Thin wage, PF and contract records in a foreign-owned factory |
Mistakes and fixes
| Area | Mistake | Fix |
|---|---|---|
| Approval | Investing before the Press Note 3 approval, or beyond what it allows | Wait for the approval and keep the structure consistent with it. See Press Note 3 |
| Ownership | Assuming a Hong Kong or Singapore holding company avoids the approval | The policy looks at beneficial ownership and control; structure openly. See structure options |
| Documents | Seeking an apostille for Chinese documents | India objected to China's accession, so use notarisation, authentication and Indian mission attestation. See documents and legalisation |
| Chinese filings | Remitting funds before outbound filings and SAFE registration are complete | Sequence Chinese and Indian steps together. See Chinese parent obligations |
| FEMA | Receiving funds but allotting shares after 60 days | Allot within 60 days or refund; file FC-GPR within 30 days of allotment. See funding and FEMA |
| Directors | Appointing a Chinese director before clearance, or having no resident director | Name a resident director first; add Chinese directors after clearance |
| Tax treaty | Paying dividends without a residence certificate and Form 41 | Collect documents before the first payment. See repatriating profits |
| Transfer pricing | Charging fees or buying components with no agreement or benchmark | Contract first; keep a benchmark file; align customs value. See transfer pricing |
| Visas | Using a business visa for hands-on work | Use the correct visa category and allow for clearance. See relocating staff |
| Provident fund | Assuming Chinese social insurance replaces EPF | There is no social security agreement; budget for EPF. See Chinese employees in India |
| Data | Moving data from China without a legal route, or ignoring DPDP | Map flows and choose a route. See data protection |
| Public contracts | Bidding for government contracts without registration | Land-border-country bidders must register first. See restricted sectors and procurement |
Three habits that avoid most of these
- Approval first: no incorporation, remittance or hiring for the project before the approval and the Chinese filings are settled.
- One owner per deadline: a named person for each filing in each country.
- Open records: keep a full file of approvals, ownership, contracts, wages and filings that you would be comfortable showing to an inspector.
Early warning signs
- A bank asks for an ownership chart you have not prepared.
- An Indian partner asks to sign before the approval arrives.
- The Chinese outbound filing and the Indian application describe the project differently.
- A staff member arrives on a visa that does not match the work.
- Payments to the parent have no contract behind them.
Official sources
Check the rules at the primary sources: Income Tax Department (India), Reserve Bank of India, Ministry of Corporate Affairs, MOFCOM (China), SAFE (China) and the Ministry of External Affairs (India).
Frequently asked questions
What is the most common mistake Chinese companies make in India?
Investing or incorporating before the Press Note 3 approval, or in a structure that does not match what was approved.
Can a Hong Kong or Singapore holding company avoid the approval?
No. The policy looks at beneficial ownership and control. A mis-described structure is a FEMA risk.
Do Chinese documents need an apostille for India?
No. India objected to China's accession to the Apostille Convention, so documents go through a Chinese notary, Chinese authentication and Indian Embassy attestation.
Can Chinese engineers work on a business visa?
A business visa is for meetings and talks, not hands-on work. Choose the right visa and allow time for clearance.
What do I need before the first dividend is paid?
A Chinese tax residence certificate, Form 41 and any no-PE declaration the payer requires.
Where do I start to avoid these mistakes?
With the Press Note 3 and documents pages, then the compliance calendar and an adviser in each country.
Related guides
Press Note 3 for Chinese Companies: When Government Approval Is Needed and What the 2026 Easing Changes
How India's Press Note 3 (2020) applies to a Chinese parent: prior government approval for investors incorporated in China, the 2026 easing for passive minority land-border ownership, the control test, the 60-day sectors, director clearance and planning.
Read the guide →Preparing Chinese Documents for India: Why There Is No Apostille Between China and India and What to Do Instead
How to prepare Chinese company documents for an Indian subsidiary: notarisation in China, authentication by the Chinese foreign affairs authority, attestation by the Indian Embassy or Consulate, certified translations and why the Apostille Convention does not apply between China and India.
Read the guide →Compliance Calendar: Indian Deadlines and the Chinese Filings They Feed
A month-by-month compliance calendar for an Indian subsidiary of a Chinese parent: TDS, GST, PF and ESI, advance tax, AGM, AOC-4, MGT-7, FLA return, approval conditions and the Chinese-side reports.
Read the guide →Exit and Restructuring: Share Sale, Buyback, Liquidation and Closing a Subsidiary Owned by a Chinese Parent
How a Chinese parent exits an Indian subsidiary: share sale and FEMA pricing, capital gains and the treaty, approval for a land-border buyer, buyback, voluntary liquidation, Chinese approvals and employee rules.
Read the guide →Sources
Last updated 26 October 2026. General information only, not legal or tax advice. Indian and Chinese rules change often; confirm current requirements before acting.