Establishing a Branch Office in India Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to set up Branch Of-fices in India with specific approval of the Reserve Bank of India. A Branch office of a foreign company in India is not allowed to carry out manufacturing or processing activities in India. However, the branch of-fice is permitted to represent the parent/group companies in some of the follow-ing activities in India: i) export or import of goods; however retail trading activities of any nature is not allowed, ii) render-ing professional or consultancy services, iii) carrying out research work of parent company, iv) promoting technical or fi-

nancial collaborations between Indian and overseas Group company, v) repre-senting the parent company in India and acting as a buying/selling agent, vi) ren-dering services in Information technolo-gy and development of software in India, vii) rendering technical support to the products supplied by parent company, viii) foreign airline or shipping company.Branch offices are permitted to acquire property for their own use and to carry out the permitted/incidental activities but not for leasing or renting out the property. Further, profits earned by the branch office is freely remittable from In-dia, subject to payment of applicable tax-es. For opening a Branch Office in India,

the following criteria’s are considered by the Reserve Bank of India while sanction-ing the branch office of foreign compa-ny: i) a profit making track record during the immediately preceding five finan-cial years in the home country and Net worth of not less than USD100,000 or its equivalent. Net worth is the total paid-up capital and free reserves, less intangible assets as per the Audited Balance Sheet or Account Statement certified by a Certi-fied Public Accountant or any Registered Accounts Practitioner by whatever name.

Establishing a Liaison Office in IndiaCompanies which are incorporated out-side India can establish Liaison Office in

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With India possessing vast natural and human resources, and being among the fastest growing nations in the world, it provides im-mense opportunities for foreign companies to grow and diversify their business. Therefore, there is a lot of interest among foreign companies and foreign nationals to open a branch / liaison / project office in India or start a business in India. In this article we look at ways a foreign company can open an office in India without starting a subsidiary. There are basically three ways for a foreign com-pany to conduct business / activities in India without starting a subsidiary company in India. Branch Office / Liaison Office allow for long-term functioning of a foreign company’s office in India with approval from the Reserve Bank of India, while project offices can be started under General approval of the Reserve Bank of India, if certain criteria’s are fulfilled.

How Foreign Companies can open a Branch Office / Liaison Office / Project Office in India

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India with the specific approval of the Reserve Bank of India. A Liaison Office can only undertake liaison work, i.e. it can act as a channel of communication between the head office abroad and par-ties in India. It is not allowed to undertake any business activity in India and cannot earn any income in India. The following are activities that can be undertaken by a Liaison Office in India: i) representing in India the parent company, ii) promoting export or import from or to India, iii) pro-moting technical or financial collabora-tions between the parent companies and companies in India, iv) acting as a com-munication channel between the parent company and Indian company. expenses of a Liaison Office are to be met entire-ly through inward remittances of foreign exchange from the Head Office outside India.While applying for establish a Liaison Of-fice in India, the following criteria’s are considered by the Reserve Bank of India while according approval: a profit making track record during the immediately pre-ceding three financial years in the home country and total Net Worth of not less

than USD 50,000 or its equivalent. Establishing a Project Office in IndiaReserve Bank of India has granted gen-eral permission to foreign companies to establish project offices in India, provid-ed 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 author-ity; or iv) a company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institu-tion or a Bank in India for the project. If the above criteria are not met, the foreign entity has to approach Reserve Bank of India for specific approval. Project offices can meet their local expenses through in-ward remittances or from local earnings.

Procedure for establishing a Branch Of-fice or Liaison Office of a foreign com-pany in IndiaA body corporate incorporate outside of India, desirous of opening a Branch Office

/ Liaison Office in India should obtain per-mission from the Reserve Bank of India under provision of FeMA, 1999. The ap-plication from such entities in Form FNC will be considered by the Reserve Bank of India under two routes: i) Reserve Bank Route – Where principal business of the foreign entity falls under sectors where 100 percent Foreign Direct Investment (FDI) is permissible under the automatic route; or, ii) Government Route – Where principal business of the foreign entity falls under the sectors where 100 percent FDI is not permissible under the automatic route. Applications falling under this category are considered by the Reserve Bank of India in consultation with the Ministry of Finance, Government of India. The application for establishing a Branch Office or Liaison Office should be forwarded by the Foreign entity through a designated AD Category – I bank to the Reserve Bank of India along with the pre-scribed documents. Also, you can talk to an IndiaFilings Business expert to help your company establish a Branch Office or Liaison Office in India.