Establishment of Branch/Liaison/Project Offices in India by Foreign Entities
Establishment of Branch/Liaison/Project Offices in India by Foreign Entities
1.PROCEDURE
A. ROUTE FOR ESTABLISHMENT OF BRANCH IN INDIA BY FOREIGN ENTITIES:-
A body corporate incorporated outside India (including a firm or other association of individuals), desirous of opening a branch Office (BO) in India have to obtain permission from the Reserve Bank under provisions of FEMA 1999. The applications will be considered by Reserve Bank under two routes:
The following additional criteria are also considered by the Reserve Bank while sanctioning Branch Offices of foreign entities:
i.e [total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name].
B. Branch Office in Special Economic Zones (SEZs)
C. Branches of Foreign Banks
Foreign banks do not require separate approval under FEMA, for opening branch office in India. Such banks are, however, required to obtain necessary approval under the provisions of the Banking Regulation Act, 1949, from Department of Banking Operations & Development, Reserve Bank.
D. APPLICATION
The application for establishing BO / LO in India should be forwarded by the foreign entity through a designated AD Category – I bank to the Chief General Manager-in-Charge, Reserve Bank of India, Foreign Exchange Department, Foreign Investment Division, Central Office, Fort, Mumbai-400 001, along with the prescribed documents including.
E. Permissible Activities of Branch Office
Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to set up Branch Offices in India with specific approval of the Reserve Bank. Such Branch Offices are permitted to represent the parent / group companies and undertake the following activities in india
F. Non Permissible Activity
Application for Undertaking Additional Activities or Additional Branch / Liaison Offices
Requests for undertaking activities in addition to what has been permitted initially by the Reserve Bank may be submitted through the designated AD Category -I bank to the Chief General Manager-in-Charge, Reserve Bank of India, Foreign Exchange Department, Foreign Investment Division, Central Office, Mumbai, justifying the need with comments of the designated AD Category – I bank. Requests for establishing additional BO / LOs may be submitted through fresh FNC form (Annex 1), duly signed by the authorized signatory of the foreign entity in the home country to the Reserve Bank of India as explained above. However, the documents mentioned in form FNC need not be resubmitted, if there are no changes to the documents already submitted earlier
2. OUR SERVICES
We’ve prepared the ideal package of services for the company type listed above to help you start your business in India. In order to make the process go as smoothly as possible, we’ve prepared a limited list of necessary documents we’ll need so that we can prepare all the rest for you. If you have any questions about these please don’t hesitate to ask.
3. DOCUMENTS REQUIRED
Items client Provide
Items We Prepare
4. FAQ
Ans.
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A Liaison Office (also known as Representative Office) can undertake only liaison activities, i.e. it can act as a channel of communication between Head Office abroad and parties in India. It is not allowed to undertake any business activity in India and cannot earn any income in India. Expenses of such offices are to be met entirely through inward remittances of foreign exchange from the Head Office outside India. The role of such offices is, therefore, limited to collecting information about possible market opportunities and providing information about the company and its products to the prospective Indian customers. A Liaison Office can undertake the following activities in India:
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Foreign Insurance companies can establish Liaison Offices in India only after obtaining approval from the Insurance Regulatory and Development Authority (IRDA). Similarly, foreign banks can establish Liaison Offices in India only after obtaining approval from the Department of Banking Operations and Development (DBOD), Reserve Bank of India.
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Permission for setting up branch offices is granted by the Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai. Reserve Bank of India considers the track record of the applicant company, existing trade relations with India, the activity of the company proposing to set up office in India as well as the financial position of the company while scrutinising the application. The application in Form FNC should be submitted to the Reserve Bank through the Authorized Dealer bank.
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Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to set up Branch Offices in India with specific approval of the Reserve Bank. Such Branch Offices are permitted to represent the parent / group companies and undertake the following activities in India:
Normally, the Branch Office should be engaged in the activity in which the parent company is engaged.
Note:
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Branch Offices are permitted to remit outside India profit of the branch net of applicable Indian taxes, on production of the following documents to the satisfaction of the Authorised Dealer through whom the remittance is effected :
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At the time of winding up of Branch/Liaison offices, the company has to approach the designated AD Category – I bank with the following documents:
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The Reserve Bank has granted general permission to foreign companies to establish Project Offices in India, provided they have secured a contract from an Indian company to execute a project in India, and
However, if the above criteria are not met or if the parent entity is established in Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran or China, such applications have to be forwarded to the Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai for approval.
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AD Category – I banks can open non-interest bearing Foreign Currency Account for Project Offices in India subject to the following:
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The general conditions applicable to Liaison/Branch/Project Office of foreign entities in India are as under;