Portfolio Management Services in GIFT City

Overview

India's first International Financial Service Centre (IFSC) opened in Gujarat's GIFT City in April 2015. With its competitive cost of operations, tax benefits, and single-window clearance and relief under various company law provisions, IFSCs provide businesses with attractive features. Recently, the Securities and Exchange Board of India (SEBI) announced that asset managers could offer portfolio management services (PMS) in IFSCs. This article discusses the criteria for establishing a PMS in IFSCs and the benefits of registering a PMS there.

What is a PMS in IFSC?

A portfolio manager (PM) is a legal entity that manages or administers a client's securities, assets, or funds, usually according to the terms of a contract. These services are known as portfolio management services (PMS). To streamlines these services in IFSCs, the Indian Government has published various guidelines. These guidelines cover permissible investors, permissible investments, and registration costs for IFSCs.

Key Criteria for Establishing a PMS in IFSC

The criteria for establishing a PMS in IFSCs are straightforward. First and foremost, the PM must have experience in managing securities, funds, or assets for at least three years. Second, the PM must have a net worth of at least INR 5 crore.

Benefits of Registering a PMS in IFSC

There are several benefits of registering a PMS in IFSCs. For instance, PMS providers enjoy a conducive environment for conducting international financial services, including tax exemptions, lower costs, and better infrastructure. Additionally, PMS providers in IFSCs also enjoy favorable regulations, streamlined procedures, and a single-window clearance mechanism.

In conclusion, establishing a PMS in IFSCs offers several benefits over other financial centers. If you are considering setting up a PMS in India, an IFSC is an excellent choice. For further information on the guidelines, regulations, and other regulatory requirements for establishing a PMS in IFSCs, contact us today.

Let’s Understand the Things in Details

Process of Registration PMS in IFSC

Availability of Name for PMS
Identification of office space in Gift City
obtaining NOC from Gift SEZ and IFSC Authorities
Apply for company / LLP Incorporation for PMS
Obtain Certificate of Incorporation
Application to the development commissioner of SEZ
Obtain Letter of Approval from SEZ Authorities for PMS
Obtain SEBI Approval for PMS

Portfolio Management Services Framework in IFSC

The framework for Portfolio Management Services (PMS) in an International Financial Service Centre (IFSC) is outlined below:

Regulatory Framework:

PMS regulations applicable to all IFSC Portfolio Managers (IFSC PM) under SEBI (IFSC) Guidelines, 2015.

Structuring:
SEBI-registered intermediaries or international associates can operate as PM in IFSC with prior approval from SEBI. If established as a subsidiary, the subsidiary must meet net worth requirements. If the subsidiary does not meet the standards, the parent company's net worth will be considered.

Net Worth:
Minimum net worth for a PM in IFSC is USD 750,000. If operating as a branch, the parent company must meet the required net worth.

Certification Requirement:
Non-resident principal officers and decision-making employees must be certified by organizations recognized by the financial markets. In the Indian securities market, NISM (National Institute of Securities Markets) certification is necessary.

Regulator in Foreign Jurisdiction:

Principal officers and decision-making personnel based outside of India must be certified by an organization, institution, association, or stock exchange recognized or authorized by a financial market regulator in that foreign jurisdiction.

Manpower Requirement:
An IFSC PM must allocate dedicated manpower specifically for providing portfolio management services from an IFSC branch.

Ring-Fencing:
The parent corporation legally, financially, operationally, and technologically must separate its domestic operations from its IFSC branch operations. The parent company is responsible for ensuring compliance of the branch - PM entity in the IFSC with applicable laws.

Qualification Requirement:
Principal officers and decision-making personnel based outside of India must be certified by a recognized financial market regulator or authorized organization, institution, association, or stock exchange in the foreign jurisdiction.
Segregation of Funds:
PMs operating in IFSC must maintain funds of clients in a separate account in the IFSC Banking Unit (IBU) as permitted by RBI.
Registration Fees:
The application fee is USD 1,500, and a one-time registration fee of USD 15,000 is required for new registrations. Post-registration, registered entities must pay a fee of USD 10,000 every five years.

If you require further information on the guidelines, regulations, or registration process for portfolio management services in IFSCs, please contact us.

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Advantages of Portfolio Management Services Registered in GIFT City- IFSC

Compared to regular PMS registered elsewhere, PMS registered in GIFT City- IFSC offer several advantages. Here are some key benefits:

1. Investment Opportunities

PMS in GIFT City- IFSC can provide services to:

Non-resident Indians
Person resident outside India
Resident financial institutions eligible under FEMA to invest funds offshore
Persons resident in India to invest funds offshore as per FEMA regulations criteria

Note: PMS operating in GIFT City- IFSC must accept funds or securities worth at least USD 70,000 from the client.

The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), India's main stock exchanges, have established international exchange and clearing organizations in GIFT IFSC. These exchanges offer over 140 trading goods, enabling international investors and non-resident Indians to trade from anywhere in the world.

PMS incorporated in GIFT City- IFSC can invest in the following securities:

Securities listed in GIFT City- IFSC
Securities issued by companies incorporated in GIFT City – IFSC
Securities issued by companies incorporated in India or foreign jurisdictions

PMS registered in GIFT City- IFSC can invest in India using the following methods:

Foreign venture capital investment (FVCI) route
Foreign portfolio investor (FPI) route
Foreign direct investment (FDI) route

2. Taxation Benefits

PMS registered in GIFT City- IFSC enjoy the following taxation benefits:

Business income for the first 10 years or first 15 years (under tax vacation u/s 80LA of the Income Tax Act, 1961) is exempt from taxes. In contrast, business income earned by PMS registered elsewhere in India is taxable.
Minimum Alternate Tax (MAT) / Alternate Minimum Tax (AMT) is applicable at a rate of 9% of book profits. However, this applies only to companies opting for the previous tax scheme.
Transactions carried out on IFSC exchanges by registered PMS are exempt from Securities Transaction Tax (STT), Commodity Transaction Tax (CTT), and stamp duty.
No Goods and Services Tax (GST) is applicable on services received by IFSC units, services supplied to IFSC units, or services provided to offshore clients.

3. Operational Benefits

PMS registered in GIFT City- IFSC enjoy the following operational benefits:

Lower operational costs due to subsidies provided by the Gujarat government.
Availability of skilled labor.
Easy access to the onshore market

High-quality infrastructure, excellent connectivity, and transportation accessibility.
Access to a variety of markets through IFSC.

4. Exempt from Compliance under Companies Act

PMS registered in GIFT City- IFSC are exempt from certain compliance requirements under the Companies Act:

Corporate Social Responsibility (CSR) rules are not applicable for the first five years after incorporating in GIFT City- IFSC.
Resident director is required only after the first year of incorporation.
Internal audit provisions apply only if included in the company's Articles of Association.
No need to form an Audit Committee, Nominations Committee, or Remuneration Committee.
Managerial compensation is not subject to any restrictions.
IFSC companies do not need to follow the same fiscal year as their holding companies.

If you need further clarification or more information about the advantages of portfolio management services registered in GIFT City- IFSC, please feel free to ask.

Some More Benefits of Portfolio Management Services Registered in GIFT City-IFSC

here are some more benefits of Portfolio Management Services Registered in GIFT City-IFSC:

Access to a dynamic and growing market: GIFT City-IFSC is one of the fastest-growing financial centers in the world, with a projected value of USD 1 trillion by 2030. PMS providers registered in GIFT City-IFSC can take advantage of this growth and the opportunities it presents for their clients.

Flexibility in structuring investments: PMS providers registered in GIFT City-IFSC have the flexibility to structure investments in a manner that best suits the needs of their clients. They can work with a wide range of asset classes, including private equity, real estate, and hedge funds.

Cost-effective and efficient operations: GIFT City-IFSC provides a competitive cost environment, lower operational costs, and top-quality technology infrastructure that makes it easy for PMS providers to operate efficiently without compromising on their service quality.

Access to a skilled workforce: GIFT City-IFSC has access to a pool of highly skilled professionals like accountants, lawyers, and financial analysts who can provide expert guidance to PMS providers on how to manage their portfolios effectively.

Regulatory advantages: PMS providers registered in GIFT City-IFSC are subject to a lower regulatory burden compared to their counterparts in other financial centers. Also, they can benefit from simplified and standardized regulatory procedures that result in faster turnaround times for their clients

Conclusion of Portfolio Management Services Registered in GIFT City- IFSC

Based on the information provided, portfolio management services registered in GIFT City- IFSC offer significant advantages. Some of the key benefits include:

Wide investment opportunities: PMS in GIFT City- IFSC can cater to non-resident Indians, persons resident outside India, resident financial institutions eligible under FEMA to invest funds offshore, and persons resident in India to invest funds offshore1. They can invest in a variety of securities ranging from those listed in GIFT City- IFSC to securities issued by companies incorporated in India or foreign jurisdictions.

Taxation benefits: PMS registered in GIFT City- IFSC enjoy tax advantages such as exemption from taxation on business income for the first 10 to 15 years1, lower Minimum Alternate Tax (MAT) or Alternate Minimum Tax (AMT) rates1, and exemption from Securities Transaction Tax (STT), Commodity Transaction Tax (CTT), and stamp duty on transactions conducted on IFSC exchanges1. Additionally, they are not subject to Goods and Services Tax (GST) on services received or provided.

Operational advantages: PMS registered in GIFT City- IFSC benefit from lower operational costs due to subsidies provided by the Gujarat government, access to skilled labor, easy access to the onshore market, high-quality infrastructure, excellent connectivity, and transportation accessibility.

Exemption from certain compliance requirements: PMS registered in GIFT City- IFSC are exempt from various compliance requirements under the Companies Act, such as Corporate Social Responsibility (CSR) rules for the initial five years1. They also have flexibility concerning the appointment of resident directors, the formation or absence of certain committees, and fiscal year alignment with their holding companies.

In conclusion, portfolio management services registered in GIFT City- IFSC offer diverse investment opportunities, tax benefits, operational advantages, and exemptions from certain compliance requirements. These advantages make them an attractive option for investors and financial institutions seeking to optimize their portfolio management activities.

How we can help in business setup of Portfolio Management Services Registered in GIFT City- IFSC

Here's how we can help:

Consultation: We can provide you with detailed consultation regarding the regulatory requirements, licensing process, and documentation necessary to set up a PMS in GIFT City-IFSC. We will guide you through the step-by-step process and ensure that you have a clear understanding of the requirements.
Entity Formation: We can help you with the formation of the entity required to operate the PMS in GIFT City-IFSC, such as setting up a company. We will guide you through the necessary legal and regulatory procedures involved in the entity formation process.
Regulatory Compliance: We will assist you in understanding and fulfilling the regulatory compliance requirements of setting up a PMS in GIFT City-IFSC. This includes compliance with the regulations of the Securities and Exchange Board of India (SEBI) and other relevant authorities.
Licensing and Registrations: We can support you in obtaining the necessary licenses and registrations for your PMS in GIFT City-IFSC. This may involve applying for registration as a portfolio manager with SEBI and fulfilling any other licensing requirements mandated by the authorities.
Documentation and Paperwork: We will assist you in preparing and reviewing the required documentation, including the application forms, legal agreements, and other necessary paperwork for setting up the PMS in GIFT City-IFSC.
Ongoing Support: Once your PMS is set up, we can provide ongoing support to ensure compliance with regulatory requirements, assist with audits and inspections, and help you stay updated on any changes or developments in the regulatory landscape.

Our goal is to simplify the business setup process for you and ensure a smooth and efficient establishment of your Portfolio Management Services in GIFT City-IFSC. Please let us know if you would like further assistance or have any specific requirements at info@estabizz.com.

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