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 RBI site.

The applications from such entities in Form FNC will be considered by the Reserve Bank under two routes:

• Automatic Route – Where principal business of the foreign entity falls under sectors where 100% 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% 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.

For Setting up the Branch office of Foreign Company in India, the applicant Foreign Company must have profit making track record for preceding five financial years in the home country and Net worth should not be less than USD 100,000 or its equivalent. In case the applicant foreign entity is a subsidiary and not eligible, then the Parent company or group company may remove the defect by issuing a Letter of Comfort (LOC).

The applicant Foreign Company is allowed to carry out only the permitted activities as prescribed below:
– 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 agent in India.
– Rendering services in Information Technology and development of software in India.
– Rendering technical support to the products supplied by parent/group companies.
– Foreign Airline/shipping Company.

Permission for setting up branch offices is granted by the Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai. Reserve Bank of India considers the track record of the applicant foreign company, existing trade relations with India, the activity of the company proposing to set up office in India as well as the financial position of the Company while scrutinising the application. The application in Form FNC should be submitted to the Reserve Bank through the Authorised Dealer bank. After obtaining approval from RBI, then it has to file Form FC-1 with ROC within 30 days for registration of Certificate of Incorporation.

Branch Offices are permitted to remit outside India profit of the branch net of applicable Indian taxes, on production of the following documents to the satisfaction of the Authorised Dealer through whom the remittance is effected:
a. A Certified copy of the audited Balance Sheet and Profit and Loss account for the relevant year;
b. A Chartered Accountant’s certificate certifying –
i. the manner of arriving at the remittable profit
ii. that the entire remittable profit has been earned by undertaking the permitted activities
iii. that the profit does not include any profit on revaluation of the assets of the branch.

Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau or any application for opening of a branch office in Jammu & Kashmir, North East Region and Andaman and the Nicobar Islands.

A branch office of a foreign mother company is not treated as a separate and distinct entity in India and for all tax purposes, the Indian government taxes the profits of such entities at higher rates. As of now the Income Tax on the profit of a foreign company is 40% in contrast to the tax rate of 30% on an Indian company.

No, if the Branch Office wants to open more than one account it has to obtain prior permission of the Reserve Bank through its AD Category I bank justifying the reason for additional account.

Only applicants from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong, Kong, Macau and Pakistan shall have to register with the State Police authorities. Copy of approval letter for persons from these countries shall be marked by the AD Category I bank to the Ministry of Home Affairs, Internal Security Division – I, Government of India, New Delhi for necessary action and record. All other countries are exempted from registering with the State Police authorities.

Yes, please refer to the Master Directions on Reporting on RBI site. The registration is required to be done once the AD bank’s approval for the establishment of office is issued.

The Branch Office/ Project Office of a foreign entity, excluding an 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, Nepal, Bhutan, China, Hong Kong and Macau require prior approval of the Reserve Bank to acquire immovable property in India. BOs/LOs/POs have general permission to carry out permitted/ incidental activities from leased property subject to lease period not exceeding five years.

Compliance India can incorporate the Branch Office of Foreign Company in 25-30 working days. The time taken for incorporation will depend on submission of relevant documents by the client and speed of Government Approvals. To ensure speedy incorporation, please ensure you have all the required documents prior to starting the incorporation process.