Requirements and Conditions :

• The name of Indian Branch office shall be same as parent company.
• The Branch office does not have any ownership; it is just extension of the existing company in the foreign country.
• All the expenses of the BRANCH office are met by the head office, if it does not have the revenue from Indian operations.
• The foreign parent company looking to start a Branch office in India shall have a profitable track record during immediately preceding five years in the home country.
• The Net Worth i.e. 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, shall be more than USD 100,000.

Documents required:

Following documents are required to open a branch office in India :

• Form FNC 1 (Three copies)
• Letter from the principal officer of the Parent company to RBI.
• Letter of authority from the parent company in favour of Local Representative.
• Letter of authority/ Resolution from parent company for setting up BRANCH office in India.
• Comfort letter from the parent company intending to support the operation in India.
• Two copies of the English version of the Certificate of Incorporation, Memorandum & Articles of association (Charter Document) of the parent company duly attested by the Indian embassy or notary public in the country of registration.
• Certification of Incorporation - Translated & Duly Notarized and properly authenticated.
• The Latest audited Balance sheet and annual accounts of parent company duly Translated notarized for past Three years and properly authenticated
• Name, Address, email ID and telephone number of the authorized person in Home Country.
• Details of Bankers of the Organization the Country of Origin along with the bank account number
• Commitment from the Organization to the effect that it will be open to report / opinion sought from its banker by the Government of India / Reserve Bank of India
• Expected funding level for operations in India.
• Details Relating to address of the proposed local office, number of persons likely to be employed, number of Foreigners among such employees and address of the head of the Local office, if decided
• Details of Activity carried out in Home Country by the applicant organization in brief about the product and services of company in Brief.
• Bankers Certificate
• Latest Proof of identity of all the Directors - Properly Certified by Banker in Home Country and duly authenticated
• Latest Proof of address all of Directors - Properly Certified by Banker in Home Country and duly authenticated
• Details of the Individuals / Company holding more 10% of Equity
• Structure of the Organization and its Shareholding pattern
• Complete KYC of Shareholders holding more than 10% Equity in the Applicant Company
• Resolution for Opening up Bank Account with the Banker
• Duly Signed Bank Account Opening Form for Indian Bank

Note: The timeline for setting up BRANCH office has increased recently due to increased documentation requirements.

Other Incorporation Requirements :

Every Branch office registered with RBI shall get itself registered with the Ministry of Corporate Affairs. On such registration a CIN i.e., Corporate Identity Number is allotted by the Registrar of Companies. The following documents shall be filled with the Registrar of Companies:

• Form 44
• Charter, statutes or memorandum and articles of association or other Instrument constituting or defining the constitution of the company(In the manner provided under Rule 16, 17 of the Companies (Central Government's) General Rules and Forms, 1956)
• If the above documents are not in English then the translated version of the documents.
• Director(s) details - individuals
• Director(s) details - bodies corporate
• Reserve bank of India approval letter
• Secretary(s) details
• Power of attorney or board resolution in favor of the authorized representative(s)

Post Incorporation Procedural Requirements :

• Permanent account number – PAN
• Tax deduction number - tan number Shop & establishment
• GST Registration (only if the Branch carries out trading activities in India)

Annual Compliance Activities :

• Maintenance of Books of Account
• Getting Annual Accounts audited
• Filling of Annual Activity Certificate with RBI
• Filling of Annual Return and Balance sheet with Registrar of Companies
• Intimating any change in constitution of Foreign Company to RBI & ROC
• Intimating any change in Directors of Foreign Company to RBI & ROC
• Intimating each and every change in the BRANCH office to RBI & ROC
• No additional place of business can be started unless approval is taken from RBI.

How to Close a Branch Office in India :

Generally a branch office licenses is given for three years. If at any time the foreign company plans to close the branch office setup in India it shall file the necessary documents with RBI. The application for the closure generally includes the followings:

• Copy of Reserve Bank's permission/ approval from the sectoral regulator(s) for establishing the BO / LO.
• Auditor's certificate: i) indicating the manner in which the remittable amount has been arrived at and supported by a statement of assets and liabilities of the applicant, and indicating the manner of disposal of assets; ii) confirming that all liabilities in India including arrears of gratuity and other benefits to employees, etc., of the Office have been either fully met or adequately provided for; and iii) confirming that no income accruing from sources outside India (including proceeds of exports) has remained un- repatriated to India.
• No-objection / Tax Clearance Certificate from Income-Tax authority for the remittance/s.
• Confirmation from the applicant/parent company that no legal proceedings in any Court in India are pending and there is no legal impediment to the remittance.
• A report from the Registrar of Companies regarding compliance with the provisions of the Companies Act, 2013, in case of winding up of the Office in India.
• Any other document/s, specified by the Reserve Bank while granting approval.

Branch office on 'Stand Alone basis" in India :

• Stand Alone Branch Offices are isolated and restricted to the Special Economic Zone (SEZ) alone and no business activity/transaction is allowed outside the SEZs in India, which include branches/subsidiaries of its parent office in India.
• No approval is necessary from RBI for a company to establish a branch/unit in SEZs to undertake manufacturing and service activities subject to specified conditions.

Expert Comments by Utsav R. Doshi :

A branch office is suitable for foreign companies looking to setup a temporary office in India and not interested or not planning to have long-term plans for the Indian operations. Also, a branch office is not allowed to carry out manufacturing activities on its own although it is permitted to subcontract these to an Indian manufacturer. Branch Offices established with the approval of RBI may remit outside India whatever profit of the branch, net of applicable Indian taxes. Most importantly, the provisions of Income Tax Act and DTAA should be kept in mind for avoiding tax litigations in future. For instance, if a foreign company is deciding to depute some personnel for X weeks or months, and for which it needs to pay salaries to such deputed personnel, then various factors would need to be kept in mind for avoiding litigations. Structuring of expenses in form of salaries vis-à- vis reimbursements, and also whether such expenses should be incurred by the parent foreign company or Indian company are some questions which need to be addressed before moving further.

Procedure for RBI Approval :

• The companies desirous of opening a liaison office in India may make an application in form FNC-1 along with the documents mentioned therein to RBI.
• 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 the Regional Office in whose jurisdiction the office is set up.
• Liaison/Representative offices have to file an Activity Certificate on an annual basis from a Chartered Accountant to the concerned Regional Office of the Reserve Bank of India, stating that the Liaison office has undertaken only those activities permitted by Reserve Bank of India.

Permitted Activities :

• Representing the parent company / group companies in India.
• Promoting export / import from / to India.
• Promoting technical/ financial collaborations between parent / group companies and companies in India.
• Acting as a communication channel between the parent company and Indian companies.

Expert Comments by Utsav R. Doshi : The role of LO is limited to collection of information, promotion of exports/imports and facilitates technical/financial collaborations. LO is not permitted to undertake any commercial activity directly or indirectly. LO acts as a channel of communication between the principal place of business or head office and entities in India. LO thus can undertake only liaison activities, i.e. it can act as a channel of communication between Head Office abroad and parties in India. If the foreign company has a longer term vision for India, then liaison office is not the best way to start with.

Foreign companies planning to execute specific projects in India can set up temporary project/site offices in India for carrying out activities only relating to that project. A foreign company that has been awarded a contract by an Indian company can set up a Project Office to execute a project in India. For opening a Project or site office, the concerned foreign company will have to file Form FNC-10 with the regional office of the Reserve Bank of India.

Conditions :

• The project is funded directly by inward remittances from abroad, or
• The project is funded by a bilateral or multilateral International Financing Agency; or
• The project has been cleared by an appropriate authority; or
• A company or entity in India awarding the contract has been granted term loan by a public financial institution or a bank in India for the project.

Expert Comments by Utsav R. Doshi : Profits earned by a Project Office can be repatriated freely after completion of the project subject to payment of taxes in India and fulfilment of other conditions. Like a branch office, a project office is also treated as an extension of a foreign company in India and taxed at the rate applicable to foreign companies. Most clients have a question whether project offices, being an entity with a minimal legal existence, are permitted to open bank accounts in India. The answer to the question is in positive. Authorized Dealer (AD) Category - I Banks can open “non-interest” bearing Foreign Currency Account for Project Offices in India subject to fulfilment of some conditions, for e.g. – each Project Office can open two Foreign Currency Accounts only, usually one denominated in USD and other in home currency, provided both are maintained with the same AD category–I bank. Also, the Foreign Currency accounts have to be closed at the completion of the Project.