Liaison, Branch & Project Office

Home / Liaison, Branch & Project Office

Establishment of Liaison office in India

Permission to set up a liaison office is granted by the Reserve Bank of India. Permissions are normally granted for a period of three years and can be extended by further request.

A liaison office is not permitted to generate revenue in India. All expenses of a liaison office must be compulsorily met only out of inward remittances into a designated bank account opened in India by the liaison office for the specific purpose.

A liaison office cannot import goods of its own nor can it carry on any business of its own. A liaison office cannot raise any invoices on behalf of the parent company. All sale proceeds generated by the efforts of the liaison office must be directly paid to the foreign parent company by means of proper banking channels or negotiable instruments such as cheques (checks) and demand drafts. A liaison office cannot also charge any commission from Indian customers for providing liaison services.

A foreign company intending to apply for a liaison office in India must have a successful, profit making track record during the immediately preceding three financial years in the home country.

Practice Area

Further the foreign parent company must have a Net Worth of USD 50,000 or its equivalent as per its latest Audited Balance Sheet or Account Statement certified by a CPA. Net worth is defined as total of paid-up capital and free reserves, less intangible assets.

A liaison office can carry on the following activities:

Representing in India the parent company / group companies.

Collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers.

Promotion of export/import from/to India and also facilitate technical/ financial collaboration between parent company and companies in India.

Acting as a communication channel between the parent company and Indian companies.

A liaison office of a foreign company upon approval from the RBI must be registered under the (Indian) Companies Act, 2013.

We assist foreign companies in establishing their liaison offices in India and further assist them in complying with all post formation legal compliances.

Some of the liaison offices which are functioning in India under our assistance:

  • 1. Menekkes GmbH
  • 2. Cambridge University, Australia
  • 3. University of Melbourne, Australia
  • 4. Invivo Research, USA
  • 5. East West Manufacturing Limited, Hong Kong and many more.

Setting up a Branch Office in India

Permission to set up a branch office is granted by the Reserve Bank of India (RBI) through its central office at Mumbai. A Branch office of a foreign company upon approval from the RBI must be compulsorily registered under the (Indian) Companies Act, 1956.

Upon registration under the Companies Act, 2013 the branch office can carry on its business activities in the same manner as a domestic company. Unlike a liaison office a branch office can generate revenue from the sales in the local market and repatriate the profits to the foreign parent company.

A branch office so approved and registered can carry on the following activities:

  • 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 agents in India.
  • Rendering services in Information Technology and development of software in India.
  • Rendering technical support to the products supplied by the parent/ group companies.
  • Foreign airline/shipping company.

Note:

A foreign company intending to apply for a branch office in India must have a successful, profit making track record during the immediately preceding five years in the home country.

Further the foreign parent company must have a Net Worth of USD 100,000 or its equivalent as per its latest Audited Balance Sheet or Account Statement certified by a CPA. Net worth is defined as total of paid-up capital and free reserves, less intangible assets.

The proposed business activities should be falling under the list as permitted by the Reserve Bank of India (RBI) for a branch office.

Branch Offices established with the approval of RBI, may remit outside India, the profits of the branch, net of applicable Indian taxes and subject to RBI guidelines.

A Branch Office is not allowed to carry out manufacturing or processing activities in India, directly or indirectly and hence it is necessary to opt for the wholly owned subsidiary if the foreign company needs to carry on manufacturing activities in India.

Retail trading activities of any nature is not allowed for a Branch Office in India.

A branch office of a foreign company is taxed at higher rates of corporate income tax than a domestic company.

We assist foreign companies in establishing their branch offices in India and further assist them in complying with all post formation legal compliances.

Setting up a Project Office in India

Permission to set up a project office is granted by the Reserve Bank of India. Project offices are those that are set up in India by a foreign company to execute projects which have been approved by the Government of India or those who secured a contract from an Indian company to execute a project in India.

A foreign company can set up its Project Office in India under the general permission if the following criteria are met:

  • The project is funded directly by inward remittance from abroad; or
  • The project is funded by a bilateral or multilateral International Financing
  • Agency; or
  • 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 the project.

However, if the above criteria are not met, the foreign company entity has to obtain a prior approval from the central office of the Reserve Bank of India.

Project office approvals are granted only for the specific project being executed in India and must close after the project is completed. Project Offices may repatriate outside India the surplus of the project on its completion, general permission for which has been granted by the RBI.