ESTABLISHMENT OF BRANCH OFFICE/ LIAISON OFFICE IN INDIA BY FOREIGN ENTITIES
With the objective of achieving greater transparency, it has been decided to place the eligibility criteria and the procedural guidelines for establishment of Branch Office (BO) and Liaison Office(LO) in India by foreign entities; in the public domain.
General Requirements:
Track Record
General Requirements:
- The application for establishing BO/LO in India may be forwarded by the foreign entity in Form FNC through AD Category -1 Bank to RBI.
- A Uniform Identification Number (UIN) will be allotted to existing as well as new BOs/ LOs, which will be required to be quoted in all references to the RBI and AD Category -1 banks.
- PAN should be obtained by BO/LO on setting up of offices in India
Eligibility criteria
Basic criteria
- Principal business of the foreign entity falls under sectors where 100 per cent FDI is permissible under the automatic route.
- Principal business of the foreign entity falls under the sectors where 100 per cent FDI is not permissible under the automatic route. Applications under this category are considered by the RBI, in consultation with the Government of India, Ministry of Finance.
Track Record
- For Branch Office - a profit making track record during the immediately preceding five financial years in the home country.
- For Liaison Office - a profit making track record during the immediately preceding three financial years in the home country.
- For Branch Office - not less than USD 100,000 or its equivalent.
- For Liaison Office - not less than USD 50,000 or its equivalent.
Applicants that do not satisfy the eligibility criteria and are subsidiaries of other companies may submit a Letter of Comfort from their parent company, subject to the condition that the parent company satisfies the prescribed eligibility criteria.
Scope of activities permitted and other procedural guidelines regarding functioning of a Branch Office / Liaison Office in India
Permitted activities
BRANCH OFFICE
- Export/ Import of goods
- Rendering professional or consultancy services
- Research work in which parent company is engaged
- Promoting technical or foreign collaborations
- Acting as a selling/buying agent
- Rendering services in IT, software development
- Technical support for supplies by parent company
- Foreign Airline/Shipping company
- Representing the parent/group company(ies)
- Promoting Export/Import
- Promoting technical collaboration
- Acting as a communication channel
Applications for additional offices or undertaking additional activities.
- Requests to be submitted to RBI.
- Fresh FNC form to be submitted.
- Justification for additional office/s to be provided if the number of Offices exceeds 4.
- Identify one of the Offices in India as the Nodal Office.
- Requests for undertaking additional activities to be submitted through the AD Category -I bank to the RBI.
Extension of validity of the approval of Liaison Offices
- Requests on letter head of LO for extension of time to be submitted to the AD Category - I bank concerned under whose jurisdiction the LO / Nodal Office is located before the expiry of the validity of the approval.
- Applications from foreign banks and insurance companies to be directly received and examined by RBI and IRDA respectively.
- No extension would be considered for LOs of entities which are NBFCs and those engaged in Construction and Development sectors (excluding infrastructure development companies). Upon expiry of the validity period, these entities have to either close down or be converted into a Joint Venture (JV) /Wholly Owned Subsidiary (WOS
- Application for closure of the BO / LO and allowing the remittance of winding up proceeds of BO / LO may be submitted to the AD Category - I bank along with the following documents:
- Auditor's certificate :
- indicating the manner in which the remit table amount has been arrived at
- confirming that all liabilities in India have been either fully met or adequately provided for;
- confirming that no income accruing from sources outside India has remained unrepatriated to India.
- No-objection or Tax Clearance Certificate from the Income-Tax authority for the remittance.
- Confirmation that no legal proceedings in any Court in India are pending against the BO / LO.
With a view to liberalizing the existing procedure in respect of BO/ LOs, it has been decided to delegate the powers to the designated AD Category - I banks, as under w.e.f 1st February 2010:
- Annual Activity certificates, on or before April 30, to be submitted to the designated AD Category - I bank instead of RBI.
- AD Category-1 Bank may extend the validity period of LO/s for a period of 3 years if the applicant has complied with the following:
- LO has submitted Annual activity Certificate for the previous years and
- Account of LO maintained with the AD is being operated in accordance with the stipulated terms and conditions.
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