Establishing a Branch Office in India
Establishing 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, 2013.
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.
Eligibility Criteria to establish a branch office in India by a foreign company
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 route, 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.
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