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Introduction
A Foreign Company incorporated outside India are allowed to set up their branch offices, Liaison offices or Project Offices in India for the limited purposes as specified by the Companies Act, 2013 and the Reserve Bank of India .
Branch Office in India:
Branch Office as stated in section 2(13) of Companies Act, 2013 ” “. With help Branch Office foreign companies can conduct their business in India in a full-fledged manner. Branch Offices are allowed to carry the same or substantially the same activities as carried out by their main/parent or group organizations. The Branch Offices are not allowed to directly indulge in carrying out the manufacturing activities as they are permitted to sub-contract such kind of services to an Indian manufacturer.
Liaison Office in India
Liaison Office also known as Representative office is primarily set up for exploring the business environment and for understanding the business and investment needs and climate of a country in which the parent company wants to diversify or through which the parent company facilitates its business. Liaison Office cannot conduct any commercial activities also and must use remittance received only from its parent foreign company to carry its activities.
Project Office in India
Project Offices are set up In India to create a presence for a limited period of time It is more or less like a branch office set up for executing a specific project like turnkey constructions, highways etc for carrying out their operations in India. Project Offices can represent the interest of the foreign company by undertaking the work of commercial activities in India if it has a secured contract with an Indian Company. These projects offices are duly registered with ROC and RBI, hence are preferred by foreign companies.
Sprinthub Solutions has team of experts providing you the best assistance, timely delivery and guaranteeing the highest customer satisfaction with respect to setting up of branch office or Liaison office or project Office in India. You may get in touch with our team on 096436-69475 or email admin@sprinthub.in for other Compliance services.
It is not directly regulated by the RBI but is required to follow some of the directives that are issued by the RBI from time to time for acceptance of deposit. It is an ideal type of entity for a specific group of people intended to deposit or lend money.
Conditions for Setup of Branch Office, Liaison Office and Project Office
Set Up of Branch Office
Foreign Parent Company must have net worth of at least $100,000 or equivalent
Five Financial Year records of parent company of its annual profit
The profits of the branch office can be remitted from India to its parent company after audit of books of A/c and payment of applicable taxes.
The name of foreign parent company and branch office must be same.
Set Up of Liaison Office
Foreign Parent Company must have net worth of at least $50,000 or equivalent
Three Financial Year records of parent company of its annual profit
The liaison office set up in India cannot earn any income in India. Must be financed from parent company.
The name of foreign parent company and branch office must be same.
Set Up of Project Office
Foreign Parent Company must have contract with Indian Company for the execution of a Project
The project must be approved and cleared from the appropriate authority.
The project is funded by inward remittance from abroad or International Financial Agency. In absence, Indian Entity will avail the loan from banks of India.
The Project Office must be opened within 6 months from the date of approval letter.
Documents Required for Incorporation
Specific Documents
Incorporation documents from the parent company translated in English
Net worth certificate attested by Certified Public Accountant (CPA)
Banker’s Report from the applicant’s banker in the host country
List of Directors and Shareholders of parent company
Audited financial statement of the last Five/Three preceding years
Board Resolution for Opening Bank Account with the Banker
Details of shareholders of the applicant company
Board Resolution from the parent Company for setting up of branch office / liaison office / project ofice in India
Process of Setup of Branch/Liaison /Project Office in India
Complete the Application Form
Application for DSC
Approval from RBI for Set up
Get Certificate of Incorporation
Document Processing
4. Filing of Application with AD Bankers
Preparation and E-filing for Registration with ROC
More Insights on Setup of Branch Office/Project Office/Liaison Office
- A Branch Office is not given the status of separate legal entity and is subject to pay tax @ 40% plus surcharge and cess and shall be treated same as like its parent company.
- Various other regulatory compliances are required to be made to Reserve Bank of India for both the Branch Office and the Liaison Office.
- No additional place of business can be introduced to the business or be started unless approval is taken from Reserve Bank of India.
- Renewal of Registration, the initial approval for operating a liaison office in India is granted for a period of three years which can be further extended to a period of another 3 years subject to compliances made and the permission granted by the Reserve Bank of India. The extension can be applied at least one or two months before the expiry of the initial time period.
FAQs on Setup of Branch Office/Project Office/Liaison Office
Yes, a Branch Office shall have a PAN Card for opening of bank accounts as well as for payment of tax for keeping a track of the monetary transactions;
The application from the above entities are considered by the Reserve Bank of India under two routes which are :-
Automatic route:– In this principal business of the foreign Company falls under such sectors where the government has allowed 100 percent of Foreign Direct Investment.
Government route:- In this route principal business of the foreign Company falls under such sectors where the government has not permitted 100 percent FDI. Here applications from the entities falling under this category and the non-government organizations are considered in consultation with the Ministry of Finance, Government of India by the RBI.
A Company is required to file within 30 days of its allotment Form FCGPR along with the requisite documents with the RBI on FIRMS portal
Yes, You can register a Company at a commercial or residential place by providing the documents as specified. There is no restriction by the department.
The formula for calculating Net Worth is as follows:-
Net Worth is total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement which shall be certified by a Certified Public Accountant or any Registered Accounts.
The Branch Office is required to carry the below mentioned activities every year:
Net Worth is total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement which shall be certified by a Certified Public Accountant or any Registered Accounts.
Maintenance of the Books of Accounts;
Audit of Annual Accounts;
Filling of the Annual Activity Certificate with Reserve Bank of India;
Filling of the Annual Return and respective Balance sheet for the Financial Year ending with the Registrar of Companies
Intimating the change in constitution of the Foreign Company to Reserve Bank of India & ROC if any;
Intimating the changes in the Directors of Foreign Company to RBI & ROC if any;
Intimating each and every change with respect to Branch Office to RBI & ROC;
No additional place of business can be introduced to the business or be started unless approval is taken from RBI.
The initial approval for operating a liaison office in India is granted for a period of three years which can be further extended to a period of another 3 years subject to compliances made and the permission granted by the Reserve Bank of India. The extension can be applied at least one or two months before the expiry of the initial time period.
It is the documentary proof evidencing that the Company has been registered and having its unique identification number as Corporate Identification Number.
As per Companies Act, 2013 it is compulsory to have an individual or firm as an Auditor of a Company. The first Auditor shall be appointed within 30 days from the date of Incorporation by the Board of Directors .