[klausjensen]

~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.

[karterk]

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...

[eldaisfish]

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.

[hawk_]

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]

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.

[klausjensen]

This is exactly what happened to me.

[BilalBudhani]

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.

[solardev]

Are you sure these aren't just thinly-veiled requests for a bribe?

[karterk]

No, they usually are very brazen about that, but this time they are generally clueless.

[primitivesuave]

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

[grepfru_it]

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]

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?

[vishnugupta]

House/plot registration is a common place where most folks encounter bribe. The person/company selling you the house/plot will ask you to bring INR 15-20K in cash to the registrar office. It'll be paid to an agent who is a conduit.

Driving license is another. You'll see tens of touts in and around the govt office; you pay about INR 2-3K and get your drivers' license. Again, a tout/agent will handle it for you end to end.

Both are very well oiled machine; money goes all the way up to politicians. Getting a posting in those offices in turn requires millions of rupees of bribe, besides influence, caste angle etc.,

Speaking from personal experience.

[elmomle]

Not the OP but typically bureaucrats will talk about fees and fines, which continue without documentation of their purpose (at which point they are explicitly bribes).

Baksheesh, whereby people expect a tip ahead of time if you want decent service, is quite common in India and is essentially another form of corruption, especially when practiced by police, bureaucrats, etc.

[nabusman]

IME the bribes are often not asked directly but instead the people in the office throw up insurmountable obstacles so that you initiate the conversation of bribes. I don't know why they do this, maybe because it puts them in a better negotiating position?

[bombcar]

Soliciting a bribe is probably illegal.

But accepting a gift to do your actual job, how could that be illegal, hmmmm?

[bluGill]

If you go first you are offering a bribe. If the police are investigating offering a bribe is entrapment and your lawyer will run with that in court.

In short it is a way to avoid getting caught.

[ricktdotorg]

I worked as a Unix guy for Morgan Stanley UK & US in the 90s. As part of a SunOS to Solaris rollout, we built & pre-configured all the AFS servers for the Bombay (as it was known at the time) office before they were wrapped & palleted up to be shipped over to India to be racked & powered on over there. There was a courier (I'm not sure if he was an actual MS employee) who apparently would travel along with all the pallets and grease the wheels at certain points with cash payments. It was well known among our project team that cash bribes were an absolutely essential part of getting the servers in one piece and at the same time to our office there in Bombay. I never did find out how much the "bribe fund" was for that project but I suppose a couple of grand would have covered it. BTW The servers did get there in one piece, and they pretty much all came up as they should have.

[bornfreddy]

I read the article a bit differently... Whenever there is a "no bribes" note, all went well - elsewhere there were obstacles which could probably be solved with bribes.

[pkphilip]

Bribes are required for each of the following for any store/shop/market:

* Trade license (renewable each year)

* Shops and establishment license Weights and measures calibration (needs to be done each year)

* To get electrical connection or to get additional capacity (Rs.100,000/KW in Bengaluru)

* Export / Import - at the ports to various officials no matter how clear your papers are

* Police clearance (for restaurants)

* Health inspector (from time to time)

* Food and Safety license (needs to be renewed periodically) Labour inspector etc

* Periodic visits from panchayat/municpality/police etc where they will demand money or take stuff for free or at huge discounts

India is a cesspit of corruption

[vinay_ys]

I had a traffic parking violation recently. When I showed up at my car, I found that there was a traffic police's wheel lock on my car's front right wheel, which I assumed is because I parked in a no-parking area (a no parking sign was about 20 meters away from where I was parked). My car was one among many cars parked in that lane and mine was the only one they fined (I guess because they had only one wheel lock to deploy).

The phone number of the constable who deployed the lock was written on the lock itself. So I called it. The constable and a sub-inspector promptly showed up within 15 minutes. They spoke very politely when I asked why I was the only one being fined. They were even apologetic as they were promptly issuing me a ticket for Rs.500. I had looked up the fine before they arrived and Rs.500 was correct. I paid the fine, they removed the lock and I drove away. They were deploying that lock on another vehicle on the same lane. No bribe whatsoever. Overall, I was surprised/delighted/dazed by the whole experience.

[tkk23]

India is huge. Could there be a district with enough integrity that it can become the place to establish a company in India?

[primitivesuave]

I highly doubt it. Bribery is baked into the culture. Everyone takes bribes, and the act of solicitation does not have the negative connotations or legal ramifications that it would have elsewhere. Most Indian people who pay regular bribes are on friendly terms with the people they pay bribes to.

Also, political parties are mostly funded by bribery, and rely on literally buying the votes of villagers to maintain power. Any political entity with the power to actually tackle corruption would have little incentive to do so.

[htoiweri23423]

Can you please not claim it is part of 'Indian' culture ? The Indian state is anything but Indian.

[wittycardio]

How is the Indian state not Indian lol

[nabusman]

I think the state of Bihar is trying to do that (just armchair analysis from reading the news)

[ummonk]

Bihar is run by elected thugs and is the last place in India that an honest business would want to go.

[boruto]

Seriously, Is this a joke. Bihar would be right at the bottom of states if I ever setup shop.

[htoiweri23423]

If some of the 'liberal-intellectual' types in India have their way, the only thing Bihar will (again) be known for is the industry of kidnapping.

[wittycardio]

Yes because Bihar is run by liberals and intellectuals ?

[dirkg]

also at every level, where you are expected to file forms or deal with any officials, you will be asked to pay some bribe, and there will be 'agents' who offer to do it for you using whatever illegal means they can, for a 'fee', and in many cases they are the only feasible way of getting it done. This happens in every corrupt economy/country but in India its an art form and taken to its logical extreme.

[dr_dshiv]

Wondering—is it easier to buy an existing entity?

[loudmax]

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.

[ignoramous]

> Do not set up a legal entity in India.

I am curious to know how the Stripe Atlas-like services from razorpay.com and clear.in have worked out for folks here in dealing with govt-facing work?

[BilalBudhani]

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.

[m12k]

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]

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]

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

[chaghalibaghali]

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]

Hi , how do you get hired via Remote ? All I can see is services to hire for employers.

[nightpool]

Remote isn't a hiring platform, it's a service companies can use to manage HR compliance. You get hired by the company, and your employment goes through Remote for compliance with local laws.

[disgruntledphd2]

You get hired by a company that uses Remote (or Deel).

[awestroke]

Blame the employer, not remote.com. The employer decides what benefits they will pay remote.com to give to employees

[spaniard89277]

Maybe you can compensate with higher pay?

[nicbou]

This is similar to what Smart does in Germany (and Belgium I think).

They're hiring freelancers as employees, and take care of all the invoicing and tax stuff for them. The freelancers can focus on their craft as if they were employees, with no loss in autonomy.

[hinkley]

My intuition is that bribes would tend to scale with the square root of the size of the enterprise, so working with a large company would reduce your overhead versus talking to the government yourself.

[aaroninsf]

That is the business model of TriNet, paving over the hassles of operating in different US states.

[codegeek]

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.

[pythonbase]

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.

[klausjensen]

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.

[Lutger]

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

[reactspa]

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.

[ramraj07]

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).

[soperj]

> 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.

[cafard]

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]

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]

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]

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.

[VBprogrammer]

As far as I can make out facilitation payments are a legal exception in US law, but they are illegal in Indian law. This is definitely in the ask a lawyer before you go making this kind of payment territory.

[radicaldreamer]

There have been many smaller companies charged with FPCA violations and even in cases where no charges were brought, the investigation cost the company enough to basically put it out of business.[0]

[0]: https://fcpablog.com/2017/05/24/hyperdynamics-another-fcpa-i...

[bluGill]

not just the us. most of europe has similar laws.

[stefan_]

Paying an official to do something they were going to do (eventually) anyway does not qualify as a bribe.

[VBprogrammer]

Jesus. Please no one take that as legal advice. Paying a bribe to get preferential treatment (even if that treatment is just to get the person to do their actual job) is a bribe none the less.

[NovemberWhiskey]

Paying an official to perform their job (perform a "routine governmental action") is a facilitating payment and is an exemption from the prohibitions of the Foreign Corrupt Practices Act.

https://www.law.cornell.edu/uscode/text/15/78dd-1

The point with a facilitating payment is that you've done everything that's actually required by law to e.g. get a business license and the official is still giving you the run-around, you are allowed to pay them. It doesn't apply in cases that relate to paying decision makers for contracts, for example.

If you're thinking about doing this, you should absolutely consult a lawyer, but the post above is wrong on the general construction of the law.

[renewiltord]

Yeah, dude doesn't deserve getting downvoted as hard as he is. Neither the "You'll get killed by FCPA" nor the "FCPA lets you do this" comments are legal advice. But what you're saying is, in fact, true. It allows US companies to continue to be competitive in places where this stuff is expected.

[VBprogrammer]

That's interesting. In the UK these would also be considered bribes. From a quick search the US and Australia are the the only countries with this principle.

[sillyfluke]

The problem is, as a foreigner, you may have been misled to think what you're asking for is legal, when in actuality it is not.

[coredog64]

Maybe. From the multitude of FCPA training I’ve had to endure, you can pay to have processing expedited if there is an official policy for it. You cannot pay $1K to the head of the office because he hints that it will speed things up.

Technically, you’re not even protected if you hire a local agent to do all of this for you.

[shrewduser]

it does sound a lot like a bribe to me.

[ninju]

citation please :-)

To me...if I have to pay someone to do their assigned job it seems like a bribe to me https://www.merriam-webster.com/dictionary/bribe (using money to affect the conduct of a person)

[NovemberWhiskey]

>citation please :-)

15 U.S. Code § 78dd–1(b)

[klausjensen]

I probably would have been, if it had been myself. However, this was my local Indian director, who is very well versed in navigating Indian bureaucracy. They were just ignorant, completely disinterested in helding and wildly incompetent.

[j45]

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

[loceng]

Well, certainly someone got your money.

[blobbers]

This is precisely why upwork exists.