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Establishing direct business presence through project, branch or liaison offices (without incorporating in India)
If a separate legal entity is not established in India, a foreign company can open a liaison, branch or project office in India. Regulatory requirements for opening such offices are described under the Foreign Exchange Management (Establishment in India of Branch or Office or Other Place of Business) Regulations, 2000 (Place of Business Regulations) and the Master Circular on Establishment of Liaison/ Branch/ Project Offices in India by Foreign Entities.

The most common choice is to open a branch office in India. The scope of a liaison office is very limited – it is entitled to carry out preliminary activities only (listed in the description below). It cannot generate revenues in India. A project office, on the other hand, is can be opened specifically for the execution of a project that has been awarded to the foreign entity in India.
Note:Proprietary or partnership concerns cannot establish presence in India by opening such offices.

There are requirements to obtain RBI approval or profitability and sometimes minimum net-worth requirements that must be met by the foreign entity which seeks to open such offices – these are discussed in the comparative table which is separately provided.
A brief summary of the conditions for opening a liaison, project or branch office is provided below:
  1. Liaison Office - A Liaison Office (also known as Representative Office) can undertake only liaison activities, i.e. it can act as a channel of communication between head office abroad and parties in India. It may collect information about possible market opportunities, promote export-import, or technical collaborations between the foreign and the Indian company, and provide information about the company and its products to the prospective Indian customers on behalf of the head office. Such liaison office cannot act as a point of sale and cannot carry out any profit making activity. The expenses of a liaison office must be met entirely through inward remittances of foreign exchange from the Head Office outside India.
Validity of approval and renewal
Setting up a liaison office requires RBI approval. Permission to set up such offices is initially granted for a period of 3 years and this may be extended from time to time by an AD Category I bank.
  1. Branch office - A Branch Officeof a foreign company may be set up in India to engage in trade of goods, research, services in the information technology sector and software development, or for promoting cross-border technical or financial collaborations, rendering professional or consultancy services, representing the parent company and acting as a buying or selling agent in India, and rendering technical support to products supplied by the parent/group companies. The branch office should be engaged in the activity in which the parent company is engaged. A branch office cannot carry out manufacturing activities (unless it is located in a Special Economic Zone), but it can outsource or sub-contract them.
The branch office cannot (i) undertake any retail activity of any nature, directly or indirectly, and (ii) carry out manufacturing or processing activities in India.

Project Office - A project office can be opened by a foreign company if it has secured a contract to execute a project in India. Project offices are restricted in operation to only such activities that are necessary or incidental to their establishment.

Certain Indian banks which have been authorised by Reserve Bank of India (RBI) under Foreign Exchange Management Act, 1999 to act as dealers in foreign exchange (Category 1) are called AD Category 1 banks. AD stands for Authorised Dealer.
Process of application for opening a liaison office / project office or branch office
The application process for opening a liaison office / project office or branch officeis identical. An application must be made to the Reserve Bank of India (Foreign Exchange Department) in Form FNC, which must indicate the details of the activities proposed to be carried out by the office.
The applicant must enclose the following documents with the application:
  • Copy of the Certificate of Incorporation / Registration attested by the Notary Public in the country of registration
Note: If the original Certificate is in a language other than in English, the same may be translated into English and notarized as above and cross verified/attested by the Indian Embassy/ Consulate in the home country.
  • Latest Audited Balance sheet of the applicant company.
Note: If the applicants’ home country laws/regulations do not insist on auditing of accounts, an Account Statement certified by a Certified Public Accountant (CPA) or any Registered Accounts Practitioner by any name, clearly showing the net worth may be submitted
  • Bankers' Report from the applicant’s banker in the host country / country of registration showing the number of years the applicant has had banking relations with that bank.
These details are not confidential - the RBI is entitled to place the details of approval in the public domain.
Detailed comparison of these modes is provided later.

Operational issues - how does a branch, project or liaison office make payments in India?

The entity which has established an office in India will be required to make payments in Indian rupees in the course of its business. Direct payment from its offshore accounts may not be feasible for each and every transaction. Hence, it is entitled to open accounts with banks in India which are maintained in domestic currency (i.e. in INR), which makes it easier to manage local payments. Unlike savings and fixed deposit accounts by residents which earn interest, these accounts do not earn any interest.

Note: Since liaison offices are not permitted to engage in revenue-generation activities, such rupee accounts should not receive revenues in India, if they are opened on behalf of a liaison office. 


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