Most German companies enter India through a wholly owned private limited company, because it limits liability, can hire and invoice freely and is taxed at domestic rates. Mittelstand firms with a strong local partner often use a joint venture instead, plant builders use a project office for a single contract, and a branch or liaison office needs RBI approval and a track record. A parent that is a partnership, such as a GmbH & Co. KG, needs its own tax review before it holds Indian shares. The right answer depends on whether you sell in India, make in India, or deliver services from India.
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Key facts
| Wholly owned subsidiary | Private limited company; 100% foreign ownership in most sectors under the Automatic Route |
|---|---|
| Joint venture | Indian partner holds shares; shareholder agreement under Indian law; FEMA pricing and option rules apply |
| Project office | For a specific contract won in India; usually set up without prior approval if conditions are met |
| Branch office | RBI approval; net worth of the German company at least USD 100,000 and a profit record for the last five years |
| Liaison office | RBI approval; net worth at least USD 50,000 and a profit record for the last three years; no income-earning activity |
| LLP | Allowed with foreign investment in sectors where 100% FDI is on the Automatic Route and no performance-linked conditions apply |
| Employer of Record | Third party employs your people in India; no entity required, not a long-term replacement |
The options side by side
| Structure | Best for | Main limits | Tax outcome in India |
|---|---|---|---|
| Wholly owned subsidiary | Sales, service, production, engineering and captive centres | Two directors (one resident), audit, ROC and RBI compliance | Taxed as an Indian company at domestic rates |
| Joint venture company | Market access, local sourcing, regulated sectors | Shareholder agreement, deadlock, exit and option clauses under Indian rules | Indian company; dividends shared |
| Project office | One plant or installation contract | Tied to the project; RBI conditions; may create a PE | Taxed as a foreign company at 35% plus surcharge and cess |
| Branch office | The parent's own consultancy, trading or technical activity | RBI approval; track-record tests; parent is directly liable | Taxed as a foreign company at 35% plus surcharge and cess |
| Liaison office | Market research and liaison only | No income or invoicing; funded from Germany | No income; PE questions if it over-reaches |
| LLP | Professional services and some investment vehicles | FDI conditions; partner roles | Taxed as an LLP at domestic rates; German side needs review |
| Employer of Record | A pilot with one to ten staff | The EOR is the legal employer; limited control | EOR bears payroll tax; PE risk remains if your staff conclude contracts |
Choosing by business model
- Sell machines, components or software to Indian customers: a subsidiary. Customers expect an Indian invoice with GST, local service and spares, and an Indian entity can hold licences and sign contracts.
- Make in India: a subsidiary, often with a land or lease decision and state incentives. Land, environmental and state-incentive approvals sit outside this guide.
- Deliver engineering or IT work to Germany from India: a subsidiary paid cost plus a mark-up. See Global Capability Centres.
- Install a plant or system once: consider a project office, and watch the six-month PE test in the tax treaty guide.
- Enter with a partner: a joint venture, with a shareholder agreement that you test against Indian law and FEMA before signing.
- Explore first: a liaison office or an EOR pilot, with a plan to convert to a subsidiary at a defined point.
If the German parent is a partnership
Many Mittelstand groups are held through a GmbH & Co. KG or a family partnership. These entities are tax-transparent in Germany: the partners, not the partnership, are the taxpayers. That affects who can claim the India-Germany treaty, who files the residence certificate and whether the 95% exemption applies. Before the parent holds the Indian shares, ask your German adviser to confirm whether a corporate holding company should sit between the partnership and India, and tell your Indian adviser so the beneficial ownership papers and Form 41 name the right person.
Joint ventures with an Indian partner
- Pricing: FEMA sets pricing floors for share issues and transfers; the shareholder agreement must work within them.
- Exit clauses: put and call options, drag and tag rights and non-compete terms are enforceable only within Indian law and the RBI's conditions, so test them before signing.
- Governance: reserved matters, board seats and deadlock rules should be drafted for an Indian company, not copied from a GmbH agreement.
- Disputes: choose a neutral seat and institution. See contracts, courts and arbitration.
Why a private limited company is the default
- Limited liability for the German parent, except where it gives guarantees or directs the business.
- Free to hire, invoice with GST, open bank accounts and own or lease property.
- Dividend repatriation is a clear, documented route under FEMA and the treaty.
- Share capital can be raised in stages, with FC-GPR filed for each issue.
- Easier to sell, restructure or wind up than a branch.
Do you need an intermediate holding company?
Usually not. The India-Germany treaty already gives a flat 10% on dividends, interest, royalties and technical fees, so a third-country holding company adds cost without a rate advantage, and it invites questions under India's GAAR and Germany's anti-abuse rules unless it has real substance. A holding company can still make sense for several Asian subsidiaries, for joint venture reasons or for a lender, but justify it commercially.
Official sources
Check the rules at the primary sources: Income Tax Department (India), Reserve Bank of India, Ministry of Corporate Affairs, Federal Central Tax Office (BZSt), Handelsregister and the Deutsche Bundesbank.
Frequently asked questions
What is the best way for a German company to enter India?
For most, a wholly owned private limited company. A joint venture suits partner-led entry, a project office suits a single contract, and branches and liaison offices need RBI approval and track records.
What net worth does a German company need for an Indian branch office?
A net worth of at least USD 100,000 and a profit record in each of the last five years. For a liaison office the tests are USD 50,000 and three years.
Does a GmbH & Co. KG need special care when it invests in India?
Yes. A transparent partnership affects who claims the treaty and whether the 95% exemption applies. Have your German adviser review it, and consider a corporate holding company.
Can a liaison office earn income in India?
No. A liaison office can only liaise. It cannot invoice or earn income, and its costs are met from remittances from the parent.
Do I need a Dutch or Singapore holding company between Germany and India?
Usually not. The treaty already gives a flat 10%, so an intermediate holding adds cost and anti-abuse questions without a rate benefit.
Can a German parent use an Employer of Record to start?
Yes, for a first few hires. The EOR is the legal employer, so control is limited, and your staff in India can still create a permanent establishment if they conclude contracts.
Related guides
Incorporating a Subsidiary in India from Germany: Who Does What, in What Order
A split plan for a German parent forming an Indian private limited company: what the German team does, what the Indian team does, SPICe+, bank account, FC-GPR and the first 180 days.
Read the guide →Setting Up a Global Capability Centre in India: A Guide for German Mittelstand and Large Groups
How German companies set up captive engineering, IT and shared service centres in India: entity choice, cost-plus transfer pricing, export of services, the works council on offshoring, data and build-operate-transfer.
Read the guide →What a German Parent Company Owes at Home When It Owns an Indian Subsidiary
German-side duties for a parent with an Indian subsidiary: corporation and trade tax, the 95% participation exemption, notification of foreign holdings, Bundesbank reports, CFC rules, HGB consolidation, anti-bribery law and Pillar Two.
Read the guide →Funding an Indian Subsidiary from Germany: Equity, Convertible Instruments, ECB Loans and RBI Reporting
How a German parent funds an Indian subsidiary: equity pricing, compulsorily convertible instruments, external commercial borrowings, euro remittance, public-lender loans, FC-GPR and the annual FLA return.
Read the guide →Sources
Last updated 26 October 2026. General information only, not legal or tax advice. Indian and German rules change often; confirm current requirements before acting.