A foreign company has to set up either a private company or a branch office in India. Setting up a branch in India requires an approval from Reserve Bank of India (RBI)
Where to apply for getting branch office license in India?
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 Authorized Dealer bank. This form is available at www.rbi.org.in
Is prior approval of the Government required before applying to RBI?
Where principal business of the foreign entity falls under sectors where 100 per cent Foreign Direct Investment (FDI) is permissible, no prior approval is required. (This is called automatic route) and in all other cases, RBI has to obtain prior consent with the Government, before issuing the license.
Whether the foreign company should have a track record in their country?
Yes. For setting up a branch office, a profit making track record during the immediately preceding five financial years in the home country and for liaison office, a profit making track record during the immediately preceding three financial years in the home country is necessary.
Are there any criteria about the net worth of the foreign company?
Yes. Net Worth [total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name], for branch office, should not be less than USD 100,000 or its equivalent and for liaison office, it should not be less than USD 50,000 or its equivalent
Should Branch office file any returns with RBI?
Liaison/Branch offices have to file an Annual Activity Certificate (AACs) from the Auditors, as at end of March, along with the audited Balance Sheet on or before September 30 of that year, stating that the Liaison Office has undertaken only those activities permitted by Reserve Bank of India.
What is the procedure for setting up Branch office?
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 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.
What are the permitted activities of Branch Office?
Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to set up Branch Offices in India with specific approval of the Reserve Bank. Such Branch Offices are permitted to represent the parent / group companies and undertake the following activities in India:
- Export / Import of goods.
- Rendering professional or consultancy services.
- Carrying out research work, in areas 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.
Is retailing activity permitted in branch office?
Retail trading activities of any nature is not allowed for a Branch Office in India
Can a branch office set up a manufacturing plant in India?
A Branch Office is not allowed to carry out manufacturing or processing activities in India, directly or indirectly
Can the profit earned by branch office in India be repatriated?
Profits earned by the Branch Offices are freely remittable from India, subject to payment of applicable taxes
Should you need our assistance in setting up a branch / liaison office, please feel free to contact us at [email protected]