As a foreign company, there are various ways you can set up your business in India. Reserve Bank of India has been extending cooperation for welcoming foreign companies to set up their offices in India with a reasonable level of simplicity. Following are the options available for a foreign company looking for an entry in India:
Requirements and Conditions :
Following documents are required to open a branch office in India :
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:
Post Incorporation Procedural Requirements :
Annual Compliance Activities :
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:
Branch office on 'Stand Alone basis" in India :
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 :
Permitted Activities :
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.
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.