Branch Office, Liaison Office and Project Office

Foreign Company can set up their operations in India through  liaison office/ representative office or Project Office. The branch office/liaison office may submit the Annual Activity Certificate (AAC) in the prescribed format as of the end of March 31.

Foreign companies can set up their operations in India through:

1. Liaison office/representative office 
2. Project office

ESTABLISHMENT OF LIAISON & PROJECT OFFICES IN INDIA BY FOREIGN ENTITIES

A body corporate incorporated outside India, desirous of opening a liaison office in India has to obtain permission from the RBI. The applications from such entities will be considered by RBI under two routes:

1. RBI route - where principal business of the foreign entity falls under sectors where 100%FDI is permissible under the automatic route.
2. Government route - where principal business of the foreign entity falls under the sectors where 100%FDI is not permissible under the automatic route. Applications under this category are considered by the RBI in consultation with the ministry of finance.

GENERAL FEATURES OF LIAISON OFFICE/ REPRESENTATIVE OFFICE:

1. The license for the liaison office is given for three years and shall be renewed every 3 years;     
2. It does not have any ownership; it is just an extension of the exiting company in the foreign country;
3. All the expenses of the liaison office are met by the head office; hence the funds shall be received from the head office account only;
4. Its role is limited to collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers.
5. It represents in India the parent company;

ACTIVITIES ALLOWED TO LIAISON OFFICE IN INDIA:

1. It acts as a channel of communication between the principal place of business or head office and entities in India;
2. It can promote export/import from/ to India and also facilitate technical/financial collaboration between a parent company and companies in India.
3. It promotes technical/financial collaborations be­tween parent companies and companies in India.

CONDITIONS PRECEDENT FOR SETTING UP LIAISON OFFICE:

1. The company looking to start a liaison office in India should have a profitable track record during the immediately preceding 3 yrs. in the home country;
2. The net worth as per the latest audited balance sheet is not to be less than or equal to USD 50000.

ANNUAL ACTIVITY TO BE CARRIED OUT BY LIAISON OFFICE:

1. Maintenance of books of account;
2. Getting annual accounts audited;
3. Filling of annual activity certificate with RBI;
4. Filling of annual return and balance sheet with ROC;
5. Intimating every change in the liaison office to RBI&ROC;
6. No additional place of business can be started unless approval is taken from RBI.

ACTIVITIES NOT PERMITTED TO LIAISON OFFICE:

1. To undertake any business activity in India and earn any income in India;
2. Solicit customers & advertise;
3. To make investments in India;
4. Purchase any immovable property.

PROJECT OFFICE:

1. Foreign company planning to execute specific projects in India can set up temporary project/ site offices in India.
2. It cannot undertake or carry on any activity other than the activity relating and incidental to the execution of the project.
3. It may remit outside India the surplus of the project on its completion, general permission for which has been granted by the RBI.

GENERAL FEATURES OF PROJECT OFFICE:

1. Profits earned by a project office can be repatriated after completion of the project;
2. It is also treated as an extension of a foreign company in India and taxed at the rate applicable to foreign companies;

PROCEDURE FOR SETTING UP PROJECT OFFICE:

The RBI 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

1. The project is funded directly by inward remittance; or
2. The project is funded by a bilateral or multilateral international financing agency; or
3. The project has been cleared by an appropriate authority; or
4. A company or entity in India awarding the contract has been granted a term loan by a public financial institution or a bank in India.

PERMITTED ACTIVITIES FOR A BRANCH OFFICE IN INDIA OF A PERSON RESIDENT OUTSIDE INDIA:

1. Export/import of goods.
2. Rendering professional or consultancy services.
3. Carrying out research work in which the parent company is engaged.
4. Promoting technical or financial collaborations between Indian companies and a parent or overseas group company.
5. Representing the parent company in India and acting as buying/ selling agent in India.
6. Rendering services in Information Technology and development of software in India.
7. Rendering technical support to the products supplied by parent/group companies.
8. Representing a foreign airline/shipping company

ANNUAL ACTIVITY CERTIFICATE (AAC):

1. The branch office/liaison office may submit the Annual Activity Certificate in the prescribed format as of the end of March 31 along with the audited financial statements including receipt and payment account on or before September 30 of that year. In case the annual accounts of the office are finalized regarding a date other than March 31, the AAC along with the audited financial statements may be submitted within six months from the due date of the Balance Sheets to the Authorised Dealer Category-bank and the Director-General of Income Tax (International Taxation), Drum Shape Building, I.P. Estate, New Delhi 110002.
2. AAC from a Chartered Accountant showing the project status and certifying that the accounts of the project office have been audited and the activities are undertaken  in conformity with the general/ specific permission given by the Reserve Bank may be submitted by the project office to the designated Authorised Dealer Category-I bank.