A person resident outside India can establish a branch office or a liaison office in India provided it meets the following criterion:
- For Branch Office — a profit making track record during the immediately preceding five financial years in the home country and net worth of not less than USD 100,000 or its equivalent.
- For Liaison Office — a profit making track record during the immediately preceding three financial years in the home country and net worth of not less than USD 50,000 or its equivalent.
Provided that a person resident outside India that is not financially sound and are subsidiaries of other companies may submit a Letter of Comfort from their parent company subject to the condition that the parent company satisfies the prescribed criterion for net worth and profit.
Permitted activities for a branch office in India of a person resident outside India
- Export/import of goods.
- Rendering professional or consultancy services.
- Carrying out research work in which the parent company is engaged.
- 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 in Ind
- Rendering services in Information Technology and development of software in India.
- Rendering technical support to the products supplied by parent/group companies.
- Representing a foreign airline/shipping company.
Permitted activities for a liaison office in India of a person resident outside India
- Representing the parent company / group companies in India.
- Promoting export / import from / to India.
- Promoting technical/ financial collaborations between parent / group companies and companies in India.
- Acting as a communication channel between the parent company and Indian companies.
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 India shall submit an application in Form FNC to an Authorised Dealer Category-I bank who may, subject to the provisions of Regulation 5, grant approval as per the directions and/or guidelines issued by the Reserve Bank in this regard.
In case no office is opened by the person resident outside India within six months from the date of approval letter, the approval for establishing the office in India shall be cancelled. In cases where the person resident outside India is not able to open the office within the stipulated time frame due to reasons beyond their control, the Authorised Dealer Category-I bank may consider granting extension of time for setting up the office by a further period of six months. Any further extension of time shall require the prior approval of the Reserve Bank in this regard.
Remittance of profit or surplus
Branch office may 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 Category-I bank through whom the remittance is effected:
- A certified copy of the audited Balance Sheet and Profit and Loss account for the relevant year.
- A Chartered Accountant’s certificate certifying
- the manner of arriving at the remittable profit;
- that the entire remittable profit has been earned by undertaking the permitted activities and
- that the profit does not include any profit on revaluation of the assets of the branc
- Approval of the Reserve Bank for establishment of branch office, liaison office or project office or any other place of business in India is required where the principal business of the applicant falls in the four sectors namely:
Defence, Telecom, Private Security and Information and Broadcasting:
- In case where the applicant is a Non-Government Organisation, Non-Profit Organisation, Body/ Agency/ Department of a foreign government. However, if such entity is engaged, partly or wholly, in any of the activities covered under Foreign Contribution (Regulation) Act, 2010 (FCRA), they shall obtain a certificate of registration under the said Act and shall not seek permission under this regulation.
This article is for educational purpose.