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~5 years ago, I hired three Indian developers. They asked me if we could set up an Indian legal entity, so that they could just get regular salaries in India wi

~5 years ago, I hired three Indian developers. They asked me if we could set up an Indian legal entity, so that they could just get regular salaries in India with tax payments, deductions etc taken care of. I agreed and we got it done. One of the worst business-decisions of my life. The amount of red tape, stupid rules, corruption, signatures, stamps, showing up physically in a certain office etc etc... Mindblowing. I will not tire you with all the details, but to this day, Indian tax authorities still hold money hostage, that they agree my Indian company is owed (GST refunds). But all attempts to actually get the money back falls on deaf ears. We have sent experts to the relevant tax offices etc, but the ONLY guy who can handle it is never there, refuses to deal with it, then says we need to go somewhere else - where we are sent back etc etc. Sent around in circles, basically - with everybody recognizing the money is in fact owed... I will never do business in India again. Happy to work with Indian developers (I still do), but they will get paid as freelancers and deal with the red tape on their end.

pythonbase 4y ago
Perhaps they were looking for some under-the-table deal, commonplace in the government offices of the subcontinent, that you failed to realise. Here, you need to may money to get your money back.
- deleted 4y ago
  [deleted]
- klausjensen 4y ago
  No, this was just incompetence/ignorance on the govts part. My local (Indian) company director had full authority to do whatever he thought was needed.
loceng 4y ago
Well, certainly someone got your money.
m12k 4y ago
In the meantime companies like remote.com and similar have sprung up, providing "employer of record" services. Basically they let you outsource the act of having a company in a given country and employing people through it, much like how Stripe lets you outsource the whole merchant account thing for payments. It seems that whenever there's red tape, there's a business opportunity in paving over it and providing a sane interface on top of it instead.
- 19h 4y ago
  I would like to second this recommendation. We’ve been using remote.com and hiring internationally suddenly became very possible and we can’t be any more happy. Before this hiring internationally was a pure nightmare to the point that we simply didn’t accept international remote developers. Thanks Remote!
  - vwcx 4y ago
    And how has that shell set-up been for your international team members? In my experience, it added just enough of a layer of obscuration to perpetuate a caste system, similar to how full time temps and vendors are currently treated in tech. US FTE employees had full HR support while Indian subcontractors had really poor HR/payroll/benefits resources from Remote. YMMV
    - spaniard89277 4y ago
      Maybe you can compensate with higher pay?
    - chaghalibaghali 4y ago
      As someone currently working on the employee side of a remote.com setup, it’s been great. They have a much better understanding of my local laws, tax systems etc than the US-based HR and Payroll departments at companies I’ve worked for in the past.
      - ceoatpiedpiper 4y ago
karterk 4y ago
Back when GST was introduced, they asked all exporters of software services to pay the 18% GST and then claim a refund because exports are exempted. This was before they introduced a process to apply for a "NOC" (which must be renewed periodically I think). So, I duly paid GST for the first couple of months. 5 years later, I'm yet to receive the refunds. First, they said that they were authorized to only sanction refunds for exporters of physical goods and then they said that this is handled by the State government, who said that it was handled by the Central. Finally Central accepted that they are in-charge of the refund, but by then COVID happened and I could not follow up for 2 years. In May, when I tried to claim the refund again, they said that this refund pertains to 2016 and it's difficult to "reopen" the accounts for that year and that's handled by yet another department. So, they have written to them to ask for the process. No replies after two emails. Story continues...
- klausjensen 4y ago
  This is exactly what happened to me.
- hawk_ 4y ago
  That sounds awful. Curious to hear if you were able to avoid GST payments in later years as should be the case for exports.
  - karterk 4y ago
    Yes, you can get a waiver if you apply for something called the "Letter of Undertaking" which allows you to not pay anything for exports. This was not available at the start.
- BilalBudhani 4y ago
  This is awful. I had to apply for Foreign Export of Services Certificate as well which turned out to be the PAN number. They also made it impossible for services exporters to claim GST back on business expenses.
- eldaisfish 4y ago
  My family’s liquor shop was forced to close because our accountants could not keep up with the constant GST changes. They quit and we could not find another on short notice. The worst part was that the shop was on the hook for the unpaid taxes of upstream suppliers - money that is yet to be fully refunded after years. India’s legal systems and the enforcement of laws are one of the biggest drags on a country with immense potential.
primitivesuave 4y ago
I came to the comments to warn exactly this, perhaps more emphatically. Do not set up a legal entity in India. It will become a never-ending void where money and time go to die. The bureaucracy is hilariously inept and bloated, and if you are not willing to pay the bribes or for some entity to navigate the systemic corruption on your behalf, you will end up in OP's situation. Source: hired many Indian developers in recent years for a SV startup
- dr_dshiv 4y ago
  Wondering—is it easier to buy an existing entity?
  - loudmax 4y ago
    Possibly, if for no other reason than the existing entity has the right connections, knows how to navigate the framework, and knows who to bribe to make things happen.
- grepfru_it 4y ago
  When I visited a Cisco office in India, I noticed there was a prominent notice of business application and listed the Indian owner of the company. I thought that was interesting and went digging into India law about ownership. When I came out of that rabbit hole I immediately had zero interest in starting up in India. Simply because of the bureaucracy and would be way more wink-wink-$$$-nudge-nudge than what I'm even used to today with my dealings in the West Indies. Then I read the article and by the time I got to the Irrigation NOC I was nodding my head 'yup, exactly what i expected'. It's very easy to read these requirements and agree that there are natural resources that (a) you don't want exploited and (b) want preserved, so all of these hurdles are necessary. But the timeline involved and the MULTIPLE bribes really drives home the fact that reforms are needed.
  - dr_dshiv 4y ago
    Well, I expected this article to be about bribes, because I assume it happens a lot. However, there were no bribes. Does anyone have actual experience with bribes in India (not traffic police)? Edit: sorry, one person openly asked for a bribe, the Panchayat. I would like to understand more about this. Do they just ask for an amount?
ramraj07 4y ago
You should watch the Japanese movie ikiru - that’s how I felt when I tried to navigate the kafkaesque GST system. I received a letter, and just to find out who I received from, I was shuffled around between 7 offices in just my cities with a total travel of 60 kilometers (my city is itself only 15km across lol).
dr-detroit 4y ago
BilalBudhani 4y ago
Being an Indian who ran a sole proprietorship company which is suppose to be relatively easier with bureaucracy I strongly relate to this comment. Not only the ease of doing business is non-existent but also the entire running the company's operations is exhaustive and riddled with inconsistencies regulations. Plus, the amount of reporting required to stay compliant is never ending. Every month you will have to file for multiple GST reports, then file quarterly GST reports again to reconcile. On the other hand, file for quarterly advance tax, then finally file for annual income tax. To top it of, GST rules changes so frequently that the entire book keeping process becomes complex & convoluted. You will end up spending more time in keeping all the things in check with the regulation instead of spending time on growing the business itself.
codegeek 4y ago
I am a US Citizen (Indian Origin) who has a US company and a subsidiary in India as well. It is certainly very difficult and cumbersome to set up entity in India but it is possible as long as you have a few things sorted out: - Have a local point of contact. If you are not Indian yourself or at least of Indian Origin, you will need to have a good local contact ideally your lead tech. who can be part of the entity - Find a good Chartered Accountant/CA (equivalent to CPA in US) who can help you set it up. DO NOT DO IT by yourself - For a US based company, I had to do something called "Appostille" which is equivalent of a Notary but for Foreign stuff. I can recommend the company we used that we still use. We pay them about 20,000 INR per month (about $250/Month) for a team of roughly 15 developers and they do all the setup, taxes, payroll, filings etc etc. PM me if anyone is interested.
soperj 4y ago
> We have sent experts to the relevant tax offices etc, but the ONLY guy who can handle it is never there, refuses to deal with it, then says we need to go somewhere else - where we are sent back etc etc. Sent around in circles, basically - with everybody recognizing the money is in fact owed... That sounds exactly like they're needing a bribe, but you're too rooted in western ways of doing things that you don't realize it.
- draw_down 4y ago
- cafard 4y ago
  US citizens bribing foreign officials can be convicted of a felony under (I think it is) The Foreign Corrupt Practices act. Whether DOJ chases down three-developer scale stuff, or has only the staff for multi-zillion class bribes, I don't know.
  - MichaelCollins 4y ago
    If you are paying them to do something they're supposed to do but refuse to do in a timely manner, that may be legal. It's called a facilitating payment or grease payment, and is an exception to the Foreign Corrupt Practices Act. Ask a real lawyer, obviously.
    - ridgered4 4y ago
      Yeah, I remember this from my compliance training because it was so ridiculous. It is just a type of bribe, but since it has a special name and a carve out it is potentially not a problem!
      - MichaelCollins 4y ago
        I think it's a distinction that matters, morally. A regular bribe is paying an official to do something the law says the official shouldn't do. Whereas grease money is essentially paying the official to follow the law and do their job properly. The latter rewards the official for their show of tactical incompetence, but at least it isn't paying them to break the law on your behalf. More like it's paying them to stop breaking the law.
reactspa 4y ago
Two anecdotes from me (based in USA). 1) India's IRS still owes me tax-refund from 1998, 1999, 2000, 2001. I gave up trying to recoup long ago. 2) I inherited an inheritance in India from someone passing away (who died without a will). A family member managed to have everything put in their name. Mindboggling.
Lutger 4y ago
It's a signal you need to pay a bribe, sorry. That's the only way to get something done.
blobbers 4y ago
This is precisely why upwork exists.
daniel-cussen 4y ago
j45 4y ago
I’ve heard some countries don’t have the same level of rule of law (and corruption instead) as anticipated.

pythonbase 4y ago

Perhaps they were looking for some under-the-table deal, commonplace in the government offices of the subcontinent, that you failed to realise. Here, you need to may money to get your money back.

deleted 4y ago
[deleted]
klausjensen 4y ago
No, this was just incompetence/ignorance on the govts part. My local (Indian) company director had full authority to do whatever he thought was needed.

loceng 4y ago

Well, certainly someone got your money.

m12k 4y ago

In the meantime companies like remote.com and similar have sprung up, providing "employer of record" services. Basically they let you outsource the act of having a company in a given country and employing people through it, much like how Stripe lets you outsource the whole merchant account thing for payments. It seems that whenever there's red tape, there's a business opportunity in paving over it and providing a sane interface on top of it instead.

19h 4y ago
I would like to second this recommendation. We’ve been using remote.com and hiring internationally suddenly became very possible and we can’t be any more happy. Before this hiring internationally was a pure nightmare to the point that we simply didn’t accept international remote developers. Thanks Remote!
- vwcx 4y ago
  And how has that shell set-up been for your international team members? In my experience, it added just enough of a layer of obscuration to perpetuate a caste system, similar to how full time temps and vendors are currently treated in tech. US FTE employees had full HR support while Indian subcontractors had really poor HR/payroll/benefits resources from Remote. YMMV
  - spaniard89277 4y ago
    Maybe you can compensate with higher pay?
  - chaghalibaghali 4y ago
    As someone currently working on the employee side of a remote.com setup, it’s been great. They have a much better understanding of my local laws, tax systems etc than the US-based HR and Payroll departments at companies I’ve worked for in the past.
    - ceoatpiedpiper 4y ago

karterk 4y ago

Back when GST was introduced, they asked all exporters of software services to pay the 18% GST and then claim a refund because exports are exempted. This was before they introduced a process to apply for a "NOC" (which must be renewed periodically I think). So, I duly paid GST for the first couple of months. 5 years later, I'm yet to receive the refunds. First, they said that they were authorized to only sanction refunds for exporters of physical goods and then they said that this is handled by the State government, who said that it was handled by the Central. Finally Central accepted that they are in-charge of the refund, but by then COVID happened and I could not follow up for 2 years. In May, when I tried to claim the refund again, they said that this refund pertains to 2016 and it's difficult to "reopen" the accounts for that year and that's handled by yet another department. So, they have written to them to ask for the process. No replies after two emails. Story continues...

klausjensen 4y ago
This is exactly what happened to me.
hawk_ 4y ago
That sounds awful. Curious to hear if you were able to avoid GST payments in later years as should be the case for exports.
- karterk 4y ago
  Yes, you can get a waiver if you apply for something called the "Letter of Undertaking" which allows you to not pay anything for exports. This was not available at the start.
BilalBudhani 4y ago
This is awful. I had to apply for Foreign Export of Services Certificate as well which turned out to be the PAN number. They also made it impossible for services exporters to claim GST back on business expenses.
eldaisfish 4y ago
My family’s liquor shop was forced to close because our accountants could not keep up with the constant GST changes. They quit and we could not find another on short notice. The worst part was that the shop was on the hook for the unpaid taxes of upstream suppliers - money that is yet to be fully refunded after years. India’s legal systems and the enforcement of laws are one of the biggest drags on a country with immense potential.

primitivesuave 4y ago

I came to the comments to warn exactly this, perhaps more emphatically. Do not set up a legal entity in India. It will become a never-ending void where money and time go to die. The bureaucracy is hilariously inept and bloated, and if you are not willing to pay the bribes or for some entity to navigate the systemic corruption on your behalf, you will end up in OP's situation. Source: hired many Indian developers in recent years for a SV startup

dr_dshiv 4y ago
Wondering—is it easier to buy an existing entity?
- loudmax 4y ago
  Possibly, if for no other reason than the existing entity has the right connections, knows how to navigate the framework, and knows who to bribe to make things happen.
grepfru_it 4y ago
When I visited a Cisco office in India, I noticed there was a prominent notice of business application and listed the Indian owner of the company. I thought that was interesting and went digging into India law about ownership. When I came out of that rabbit hole I immediately had zero interest in starting up in India. Simply because of the bureaucracy and would be way more wink-wink-$$$-nudge-nudge than what I'm even used to today with my dealings in the West Indies. Then I read the article and by the time I got to the Irrigation NOC I was nodding my head 'yup, exactly what i expected'. It's very easy to read these requirements and agree that there are natural resources that (a) you don't want exploited and (b) want preserved, so all of these hurdles are necessary. But the timeline involved and the MULTIPLE bribes really drives home the fact that reforms are needed.
- dr_dshiv 4y ago
  Well, I expected this article to be about bribes, because I assume it happens a lot. However, there were no bribes. Does anyone have actual experience with bribes in India (not traffic police)? Edit: sorry, one person openly asked for a bribe, the Panchayat. I would like to understand more about this. Do they just ask for an amount?

ramraj07 4y ago

You should watch the Japanese movie ikiru - that’s how I felt when I tried to navigate the kafkaesque GST system. I received a letter, and just to find out who I received from, I was shuffled around between 7 offices in just my cities with a total travel of 60 kilometers (my city is itself only 15km across lol).

dr-detroit 4y ago

BilalBudhani 4y ago

Being an Indian who ran a sole proprietorship company which is suppose to be relatively easier with bureaucracy I strongly relate to this comment. Not only the ease of doing business is non-existent but also the entire running the company's operations is exhaustive and riddled with inconsistencies regulations. Plus, the amount of reporting required to stay compliant is never ending. Every month you will have to file for multiple GST reports, then file quarterly GST reports again to reconcile. On the other hand, file for quarterly advance tax, then finally file for annual income tax. To top it of, GST rules changes so frequently that the entire book keeping process becomes complex & convoluted. You will end up spending more time in keeping all the things in check with the regulation instead of spending time on growing the business itself.

codegeek 4y ago

I am a US Citizen (Indian Origin) who has a US company and a subsidiary in India as well. It is certainly very difficult and cumbersome to set up entity in India but it is possible as long as you have a few things sorted out: - Have a local point of contact. If you are not Indian yourself or at least of Indian Origin, you will need to have a good local contact ideally your lead tech. who can be part of the entity - Find a good Chartered Accountant/CA (equivalent to CPA in US) who can help you set it up. DO NOT DO IT by yourself - For a US based company, I had to do something called "Appostille" which is equivalent of a Notary but for Foreign stuff. I can recommend the company we used that we still use. We pay them about 20,000 INR per month (about $250/Month) for a team of roughly 15 developers and they do all the setup, taxes, payroll, filings etc etc. PM me if anyone is interested.

soperj 4y ago

> We have sent experts to the relevant tax offices etc, but the ONLY guy who can handle it is never there, refuses to deal with it, then says we need to go somewhere else - where we are sent back etc etc. Sent around in circles, basically - with everybody recognizing the money is in fact owed... That sounds exactly like they're needing a bribe, but you're too rooted in western ways of doing things that you don't realize it.

draw_down 4y ago
cafard 4y ago
US citizens bribing foreign officials can be convicted of a felony under (I think it is) The Foreign Corrupt Practices act. Whether DOJ chases down three-developer scale stuff, or has only the staff for multi-zillion class bribes, I don't know.
- MichaelCollins 4y ago
  If you are paying them to do something they're supposed to do but refuse to do in a timely manner, that may be legal. It's called a facilitating payment or grease payment, and is an exception to the Foreign Corrupt Practices Act. Ask a real lawyer, obviously.
  - ridgered4 4y ago
    Yeah, I remember this from my compliance training because it was so ridiculous. It is just a type of bribe, but since it has a special name and a carve out it is potentially not a problem!
    - MichaelCollins 4y ago
      I think it's a distinction that matters, morally. A regular bribe is paying an official to do something the law says the official shouldn't do. Whereas grease money is essentially paying the official to follow the law and do their job properly. The latter rewards the official for their show of tactical incompetence, but at least it isn't paying them to break the law on your behalf. More like it's paying them to stop breaking the law.

reactspa 4y ago

Two anecdotes from me (based in USA). 1) India's IRS still owes me tax-refund from 1998, 1999, 2000, 2001. I gave up trying to recoup long ago. 2) I inherited an inheritance in India from someone passing away (who died without a will). A family member managed to have everything put in their name. Mindboggling.

Lutger 4y ago

It's a signal you need to pay a bribe, sorry. That's the only way to get something done.

blobbers 4y ago

This is precisely why upwork exists.

daniel-cussen 4y ago

j45 4y ago

I’ve heard some countries don’t have the same level of rule of law (and corruption instead) as anticipated.