Setting up of Branch Office, Liaison Office, Project Office, Site Office & Operations there in:
1. Definitions Under Foreign Exchange Management Act & Regulations made there under
- ‘Branch Office’ in relation to a company, means any establishment described as such by thecompany.
- ‘Liaison Office’ means a place of business to act as a channel of communication between the principal place of business or Head Office or by whatever name called and entities in India but which does not undertake any commercial, trading or industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal bankingchannel.
- ‘Project Office’ means a place of business in India to represent the interests of the foreign company executing a project in India but excludes a LiaisonOffice.
- ‘Site Office’ means a sub-office of the Project Office established at the site of a project but does not include a LiaisonOffice.
- ‘Stand-alonebasis means such branch offices would be isolated and restricted to the Special Economic Zone alone and no business activity/ transaction will be allowed outside the Special Economic Zones in India which includes branches/subsidiaries of its parent office inIndia.
2. Permission for Opening of Branch Office or Liaison Office or Project Office:
The person resident outside India proposing to open branch office or liaison office shall meet the following criteria:
|Net Worth Criteria||Profitability Criteria|
|Branch Office||USD 1,00,000 or more||Profitable in the preceding five years|
|Liaison Office||USD 50,000 or more||Profitable in the preceding three years|
In case a person resident outside India does not fulfillthese criteriathenhe/she should submit a letter from the holding or group company who is meeting in eligibility criteria as above.
No approval is required in the following circumstances:
- The Banking Companies and Insurance Company residents outside India to establish anyoffice in India if such Company has obtained necessary approval meter Banking Regulation Act and IRDA Act resp.
(b) The companies outside Indiaestablish a branch office in the Special Economic Zones (SEZs) to undertake manufacturing and service activities, subject to the conditionsthat the branch offices isfunctioning in sector where 100% FDI is permitted, have made necessary Compliances under Companies Act and such branch office is that on stand-alone basis
2.2 Eligibility to set-up Project office in India:
A foreign company may open project office/(s) in India provided it has secured a contract to execute a Project in India from an Indian company, and
- the project is funded directly by inward remittance from abroad;or
- the project is funded by a bilateral or multilateral International Financing Agency.
- the project has been cleared by an appropriate authority;or
- a company or entity in India awarding the contract has been granted term loan by a Public Financial Institution or a bank in India for theProject.
The Branch office and Liaison office can undertake only permitted activities as under:
2.3 Permitted activities for a Branch & Liaison office:
2.3.1 Permitted activities for a Branch office
- Export/import of goods.
- Rendering professional or consultancyservices.
- Carrying out research work in which the parent company isengaged.
- Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
- Representing the parent company in India and acting as buying/ selling agent inIndia.
- Rendering services in Information Technology and development of software inIndia.
- Rendering technical support to the products supplied by parent/groupcompanies.
- Representing a foreign airline/shippingcompany.
2.3.2 Permitted activities for a Liaison Office
- Representing the parent company / group companies inIndia.
- Promoting export / import from / toIndia.
- Promoting technical/ financial collaborations between parent / group companies and companies inIndia.
- Acting as a communication channel between the parent company and Indiancompanies.
2.4 Application for Establishing an Office in India
A person resident outside India desiring to establish a branch office or a liaison office or a project office or any other place of business in Indiashall make an application to Authorized Dealers Category – I Bank who after review of application shall grant approval as per the directions or guidelines issued by Reserve Bank of India.
Any application from a person resident outside for opening of a branch office or a liaison office or a project office or any other place of business in India shall require prior approval of Reserve Bank in the following cases where:
- the applicant is a citizen of or is registered/incorporated inPakistan.
- the applicant is a citizen of or is registered/incorporated in Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau and the application is for opening a liaison, branch or project office in Jammu and Kashmir, North East region and Andaman and NicobarIslands;
- the principal business of the applicant falls in the four sectors namely Defence, Telecom, Private Security and Information &Broadcasting.The approval of the Reserve Bank of India is not required in cases:
- where Governmentapproval or license/permission by the concerned Ministry/ Regulator has already been granted.
- Further, in the case of proposal for opening a project office relating to Defencesector, no separate reference or approval of Government of India shall be required if the said non-resident applicant has been awarded a contract by/entered into an agreement with the Ministry of Defence or Service Headquarters or Defence Public Sector Undertakings.
- TheapplicantisaNon-GovernmentOrganization,Non-ProfitOrganization,Body/Agency/Departmentofaforeign government.
Such applications shall be forwarded to the Reserve Bank, Foreign Exchange Department, Central Office Cell, New Delhi by the Authorized Dealer Category-I bank and are considered in consultation with the Government of India.
The applicant needs to open office within six months from the date of approval provide for bonafide reasons. This period can be extended for a further period of six months.The permission to open Liaison is granted for three years (2 years for Construction and development & finance Company) and can be extended for a further period of 3 years.
The Branch Office, Liaison Office etc.are to make Compliances as per the Provision of FEMAas per directions/ guidelines of RBI. The Branch Office or Liaison Office can be closed by submission of application to the Authorized Dealer (Category – I) Bank and after approvalby the same.
2.5 Acquisition & transfer of immovable properties by Branch/ Liaison office in India
Acquisition of property by branch office/project office are governed by Regulation under FEMA.
A person resident outside India permitted to establish a branch office or liaison office or project office may apply to the concerned Authorized Dealer Category-I bank for transfer of its assets to a Joint Venture, a Wholly Owned Subsidiary or any other entity in India who shall approve the same as per guidelines of RBI.
2.6 Remittances Outside India
Branch office may remit profit (Net of Indian Taxes) outside India after making an application to Authorized Dealer Category- I Bankon being its satisfied. Branch office/ Project may also remit funds out of India out of proceeds of winding up as per the guidelines of RBI after meeting all the liabilities towards Indian taxes and other liabilities in India by make application to Authorized Dealer Category- I Bank and on being its satisfied.