Foreign Subsidiary
Also known as: Wholly owned subsidiary
A foreign subsidiary is a separate legal company, incorporated under the laws of the country it operates in, but owned and controlled by a parent company headquartered elsewhere. It is the parent’s own entity in that market: it hires employees directly, holds contracts and assets, pays local taxes, and carries the parent’s brand while remaining a distinct legal person with its own liability.
Setting up a foreign subsidiary is the most complete and permanent way to establish in a country. It gives the parent full control over operations, hiring, and intellectual property, and it is the structure that makes sense once headcount and activity justify the cost. The trade-off is that incorporation is slow, involves ongoing legal, tax, and statutory-compliance obligations, and is not quickly reversible — which is why companies often bridge with an Employer of Record for early hires before committing to their own entity.
For Global Capability Centres in India, the foreign subsidiary is the standard end-state structure. A GCC is typically a wholly owned Indian subsidiary of the global parent — the captive entity through which it employs its engineers, analysts, and leaders and owns the work they produce. Companies frequently reach it in stages: testing the market or making first hires through an EOR, then incorporating a subsidiary and transferring people onto it as the centre scales into a permanent, entity-owned operation with its own leadership and charter.
Frequently asked questions
What is a foreign subsidiary?
A foreign subsidiary is a company incorporated in one country but owned and controlled by a parent company based in another. It is the parent’s own legal entity in that market, hiring staff and holding contracts directly.
What is the difference between a foreign subsidiary and an Employer of Record?
A foreign subsidiary is the company’s own incorporated entity, giving full control but requiring set-up and ongoing compliance, whereas an Employer of Record lets a company employ people in a country without any entity of its own. Companies often use an EOR first, then move to a subsidiary as they scale.
Is a GCC a foreign subsidiary?
Yes, typically. A Global Capability Centre in India is usually structured as a wholly owned Indian subsidiary of the global parent — the captive entity through which it employs its people and owns the work they deliver.
When should a company set up a foreign subsidiary instead of using an EOR?
A company should set up a foreign subsidiary when its headcount and activity in the market justify the cost and it wants full, permanent control over operations, hiring, and intellectual property — whereas an EOR suits early, small-scale, or temporary hiring where an entity is not yet warranted.