setup liaison or branch or project offices of foreign entities in india

7/21/2019 Setup Liaison or Branch or Project Offices of Foreign Entities in India

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Liaison / Branch / Project Offices of

foreign entities in Indiawww.csgauravsharma.com

[email protected]
http://www.csgauravsharma.com/mailto:[email protected]:[email protected]://www.csgauravsharma.com/


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A. With effect from February 1, 2010, foreign companies/entities desirous of

setting up of Liaison Office / Branch Office (LO/BO) are required to submit

their application in Form FNC along with the documents mentioned

therein to Foreign Investment Division, Foreign Exchange Department,Reserve Bank of India, Central Office, Mumbai through an Authorised Dealer

bank. This form is available at www.rbi.org.in

B. The applications will be considered by the Reserve Bank under two routes:

Reserve Bank Route - Where principal business of the foreign entity falls under

sectors where 100 per cent Foreign Direct Investment (FDI) is permissible under

the automatic route.

Government Route - Where principal business of the foreign entity falls under

the sectors where 100 per cent FDI is not permissible under the automatic route.Applications from entities falling under this category and those from Non -

Government Organisations / Non - Profit Organisations / Government Bodies /

Departments are considered by the Reserve Bank in consultation with the

Ministry of Finance, Government of India.
http://rbi.org.in/http://rbi.org.in/http://rbi.org.in/http://rbi.org.in/http://rbi.org.in/http://rbi.org.in/http://rbi.org.in/http://rbi.org.in/


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The application Form FNCshall be completed and submitted to the AD Category - I

bankdesignatedby the applicant

Enclose the following documents:

Copy of the Certificate of Incorporation / Registration attested by the Notary Public in the

country of registration

[If the original Certificate is in a language other than in English, the same may be

translated into English and notarized as above and cross verified/attested by the Indian

Embassy/ Consulate in the home country].

Latest Audited Balance sheet of the applicant company.

[If the applicants home country laws/regulations do not insist on auditing of accounts, an

Account Statement certified by a Certified Public Accountant (CPA) or any Registered

Accounts Practitioner by any name, clearly showing the net worth may be submitted]

Bankers' Report from the applicants banker in the host country / country of registrationshowing the number of years the applicant has had banking relations with that bank.


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C. Additional criteria considered by the Reserve Bank while sanctioning Liaison/Branch

Offices of foreign entities:

Profit Making Track Record in the home country

For Branch Office during the immediately preceding five financial years

For Liaison Office during the immediately preceding threefinancial years

Net Worth [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 PublicAccountant or any Registered Accounts Practitioner by whatever name].

For Branch Office not less than USD 100,000 or its equivalent.

For Liaison Office not less than USD 50,000 or its equivalent.


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D. Permission to set up Liaison offices is initially granted for a period of 3 years and this

may be extended from time to time by the Authorised Dealer in whose jurisdiction theoffice is set up.

The Branch / Liaison offices established with the Reserve Bank's approval will be

allotted a Unique Identification Number (UIN).

The BOs / LOs shall also obtain Permanent Account Number (PAN) from the IncomeTax Authorities on setting up the offices in India.


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E. Liaison/Branch offices have to file an Annual Activity Certificate (AACs) from the

Auditors, as at end of March 31, along with the audited Balance Sheet on or before

September 30 of that year, stating that the Liaison Office has undertaken only those

activities permitted by Reserve Bank of India. In case the annual accounts of the LO/ BO are finalizedwith reference to a date other

than March 31, the AAC along with the audited Balance Sheet may be submitted within

six months from the due date of the Balance Sheet.

LOs/BOs are required to furnish copy of the Annual Activity Certificate (AAC) to Director

General of Income Tax (International Taxation), Drum Shaped Building, I.P. Estate, NewDelhi 110002.

accompanied by audited financial statements including receipt and payment account.

Further, at the time of renewal of permission of LOs by AD banks, they may note to

endorse a copy of each such renewal to the office of the DGIT (international Taxation).

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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Procedure for setting up Project Office

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

i. the project is funded directly by inward remittance from abroad; or

ii. the project is funded by a bilateral or multilateral International Financing Agency; or

iii. the project has been cleared by an appropriate authority; or

iv. 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 the project.

However, if the above criteria are not met or if the parent entity is established in

Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran , China, Hong Kong or Macau, such

applications have to be forwarded to the Foreign Exchange Department, Reserve Bank

of India, Central Office, Mumbai for approval.


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General conditions applicable to Liaison / Branch /

Project Office of foreign entities in India

(i) Without prior permission of the Reserve Bank, no person being a citizen of/ registered

in Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau can

establish in India, a Branch or a Liaison Office or a Project Office or any other place of

business.

(ii) Proprietary concerns set up abroad are not allowed to establish Branch

/Liaison/Project Offices in India.

(iii) Entities from Nepal are allowed to establish only Liaison Offices in India.

(iv) Branch/Project Offices of a foreign entity, excluding a Liaison Office are permitted to

acquire property for their own use and to carry out permitted/incidental activities but

not for leasing or renting out the property. However, entities from Pakistan,

Bangladesh, Sri Lanka, Afghanistan, Iran, Bhutan or China are not allowed to acquire

immovable property in India even for a Branch Office. These entities are allowed to

lease such property for a period not exceeding five years.


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(v) Branch / Liaison / Project Offices are allowed to open non-interest bearing INR current

accounts in India.

(vi) Powers relating to transfer of assets of Liaison / Branch Office/Project Office have beendelegated to AD Category-1 Banks subject to compliance with certain stipulations:

submission of AACs (up to the current financial year) at regular annual intervals with

copies endorsed to DGIT (International Taxation) and

obtained PAN from IT Authorities and have got registered with ROC under Companies

Act 1956. A certificate is to be submitted from the Statutory Auditor furnishing details of assets to

be transferred indicating their date of acquisition, original price, depreciation till date,

present book value or WDV value and sale consideration to be obtained. Statutory

Auditor should also confirm that the assets were not re-valued after their initial

acquisition. The sale consideration should not be more than the book value in each

case. The assets should have been acquired by the LO/BO/PO from inward remittances and

no intangible assets such as good will, pre-operative expenses should be included. AD

bank should scrutinise and ensure that no revenue expenses such as lease hold

improvements incurred by LO/BOs are capitalised and transferred to JV/WOS.


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To be continued..

AD bank to ensure payment of all applicable taxes while permitting transfer of assets.

Transfer of assets to be allowed by AD banks only when the foreign entity intends to close

their LO/BO/PO operations in India. Credits to the bank accounts of LO/BO/PO on account of such transfer of assets will be

treated as permissible credits.

The relevant documents are to be preserved separately for scrutiny by their own auditors

and RBI auditors.

(vii) Authorised Dealers can allow term deposit account for a period not exceeding 6 months infavor of a branch/office of a person resident outside India provided the bank is satisfied that the

term deposit is out of temporary surplus funds and the branch / office furnishes an undertaking

that the maturity proceeds of the term deposit will be utilised for their business in India within 3

months of maturity. However, such facility may not be extended to shipping/airline companies.

(viii) Permission to establish offices, in India by foreign Non-Government Organisations/Non-Profit Organisations/Foreign Government Bodies/Departments, by whatever name called, are

under the Government Route. Such entities are required to apply to the Reserve Bank for prior

permission to establish an office in India, whether Project Office or otherwise.


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F. All the new entities setting up LO/BO/PO shall also:

submit a report containing information as per Annex (given in AP DIR.Cir.35 dated

September 25, 2012) within five working days of the LO/BO/PO becoming functional

to the DGP of the state concerned in which LO/BO/PO has established its office;

if there are more than one office of such a foreign entity, in such cases to each of the

DGPconcerned of the state where it has established office in India;

a copy of the report as per above mentioned Annex shall also be filed with the DGP

concerned on annual basis along with a copy of the Annual Activity Certificate/Annual

report required to be submitted by LO/BO/PO concerned, as the case may be.

A copy of report thus filed as above shall also be filed with AD by LO/BO/PO concerned.

G. The existing LO/BO/PO shall henceforth report the information as per above mentionedAnnex along with the copy of Annual Activity Certificate/Annual report to DGP of state

concerned and also file a copy of the same with AD bank.


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Annexures (given in AP DIR.Cir.35 dated September 25, 2012):

Details of the Foreign Entity (Name, Address, Date and Place of Incorporation, E-mail ID or

Web address )

Details of Office in India (Type of OfficeLiaison Office / Branch Office / Project Office or

for others indicate type , Address, Contact Number, Date of opening of Office)

Head of Office in India (Name, Nationality, Designation, Address, Passport Particulars are

(i) Passport Number (ii) Place of Issue (iii) Date of Issue (iv) Date of Expiry (v) Any other

relevant information, E-mail address, Land line number and Mobile number)

Whether all foreign nationals employed at Liaison/Branch/Project Offices are on E Visas.

If not, indicate details of such foreign nationals.

Whether the foreign nationals on E visas have reported to mandatory authorities i.e.

Police Station etc. If not, name of such nationals / nationality along with relevant detailsand reasons for not complying with requirement

List of Personnel employed, including foreigners in India Office


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To be continued..

List of foreigners other than employees who visited Indian Office in connection with

the activities of the company with details

Projects/ Contracts/Collaborations worked upon or initiated during the year along with

details

List of equipment imported for business activities in India

Details of suppliers or services rendered to the Government Sector.

Details of places / states visited along with dates, accommodation used.

Details of contact with Government Departments / PSUs including names of officials

Details of contact with Civil Society Bodies / Trusts / Non-Government Organisation.


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Liaison / Branch / Project

Offices of foreign entities in

India

www.csgauravsharma.com

[email protected]

9990694230
http://www.csgauravsharma.com/mailto:[email protected]:[email protected]://www.csgauravsharma.com/

setup liaison or branch or project offices of foreign entities in india

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