Foreign cos can get 8% tech royalty on exports

NEW DELHI: Foreign firms providing technology to Indian ventures will now be allowed to receive royalty up to 8% on exports and 6% on domestic sales, without any curb on the duration of the royalty payment, irrespective of the firm’s equity shareholding in the Indian venture.
Currently, only wholly-owned subsidiaries of the technology provider are entitled to make royalty payments to the parent without any restriction on duration. If the equity stake of the foreign technology provider in the Indian company is less than 100%, the royalty payment is, currently, allowed only for seven years from the commencement of commercial production or up to ten years from the date of the foreign technology collaboration agreement, whichever is earlier.
According to a statement by the department of industrial policy and promotion (DIPP), the relaxation of norms for royalty payment is in line with the progressive liberalisation of the FDI regime. It would also lead to uniform policy dispensation regarding royalty payment to the foreign technology providers.
According to sources, the new norm of royalty payment, irrespective of equity status, would cover foreign investment proposals under the automatic route and the FIPB route. Payment of royalty would be allowed even if there is no financial investment in the Indian firm by the technology provider. “Technology collaboration agreements may henceforth be permitted on the automatic approval route, to make royalty payments at 8% on exports and 5% on domestic sales without any restriction on the duration of the royalty payments. The ceiling on payment of lumpsum fee/royalty on the automatic route would continue to apply in all cases.�