TaxTMI 
TaxTMI 
Master Circular on Establishment of Liaison / Branch / Project Offices in India by Foreign Entities.
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.... Chief General Manager-in-Charge INDEX (A) General (B) Liaison Office (C) Branch Offices (D) Application for Undertaking Additional Activities or Additional Branch / Liaison Offices (E) Annual Activity Certificates to be Submitted by Branch/Liaison Offices (F) Closure of Branch/Liaison Offices (G) Project Office (H) Other General Conditions Applicable to Branch / Liaison / Project Offices of Foreign Entities in India Annex 1 FNC Annex 2 Format of the Letter of Comfort Annex 3 Appendix List of Notifications/Circulars consolidated in this Master Circular Establishment of Branch/Liaison/Project Offices in India by Foreign Entities (A) GENERAL A body corporate incorporated outside India (including a firm or other association of individuals), desirous of opening a Liaison Office (LO) / Branch Office (BO) in India have to obtain permission from the Reserve Bank under provisions of FEMA 1999. The applications from such entities in Form FNC (Annex-1) will be considered by Reserve Bank under two routes: • Reserv....
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.... of the applicant's background, antecedents of the promoter, nature and location of activity, sources of funds, etc. and also ensure compliance with the KYC norms before forwarding the application together with their comments/ recommendations to the Reserve Bank. The Branch / Liaison offices established with the Reserve Bank's approval will be allotted a Unique Identification Number (UIN) (www.rbi.org.in/scripts/Fema.aspx). The BOs / LOs shall also obtain Permanent Account Number (PAN) from the Income Tax Authorities on setting up the offices in India. (B) LIAISON OFFICE b.1 Permissible Activities for a 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 is not allowed to undertake any business activity in India and cannot earn any income in India. Expenses of such offices are to be met entirely through inward remittances of foreign exchange from the Head Office outside India. The role of such offices is, therefore, limited to collecting information about possible market opportunities and providing informatio....
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.... Reserve Bank of India, Central Office, Mumbai 400 001, quoting the reference number of the original approval letter and the UIN. The application for extension of the validity period of the LOs of banks and entities engaged in insurance business has to be directly submitted to the Department of Banking Operations and Development, Reserve Bank and Insurance Regulatory and Development Authority (IRDA), respectively as stipulated by them, as hitherto. Further, 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), in conformity with the extant Foreign Direct Investment policy. (C) BRANCH OFFICES c.1 Permissible Activities a). 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 und....
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.... of the Companies Act,1956 (Section 592 to 602); • such units function on a stand-alone basis. (ii) In the event of winding-up of business and for remittance of winding-up proceeds, the branch shall approach an AD Category - I bank with the documents as mentioned under "Closure of Liaison / Branch Office" except the copy of the letter granting approval by the Reserve Bank. c.3 Branches of Foreign Banks Foreign banks do not require separate approval under FEMA, for opening branch office in India. Such banks are, however, required to obtain necessary approval under the provisions of the Banking Regulation Act, 1949, from Department of Banking Operations & Development, Reserve Bank. (D) Application for Undertaking Additional Activities or Additional Branch / Liaison Offices Requests for undertaking activities in addition to what has been permitted initially by the Reserve Bank may be submitted through the designated AD Category -I bank to the Chief General Manager-in-Charge, Reserve Bank of India, Foreign Exchange Department, Foreign Investment Division, Central Office, Mumbai, justifying the need with comments of the designated AD Category ....
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....ch/Liaison offices the company has to approach the designated AD Category - I bank with the following documents: a) Copy of the Reserve Bank's permission/ approval from the sectoral regulator(s) for establishing the BO / LO. b) 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. c) No-objection / Tax Clearance Certificate from Income-Tax authority for the remittance/s. d) 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. e) A report from the Registrar of Companies regarding compliance with the provisions of the Companies Act, 1956, in case of winding up of the Office in India.....
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.... India, Central Office, for approval. g.2 Opening of Foreign Currency Account AD Category - I banks can open non-interest bearing Foreign Currency Account for Project Offices in India subject to the following: • i. The Project Office has been established in India, with the general / specific permission of Reserve Bank, having the requisite approval from the concerned Project Sanctioning Authority concerned. • ii. The contract, under which the project has been sanctioned, specifically provides for payment in foreign currency. • iii. Each Project Office can open two Foreign Currency Accounts, usually one denominated in USD and other in home currency, provided both are maintained with the same AD category-I bank. • iv.  ....
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....ffices in India. (iv) Branch/Project Offices of a foreign entity, excluding a Liaison Office are permitted to acquire property for their own use and to carry out permitted/incidental activities but not for leasing or renting out the property. However, entities from Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, Bhutan or China are not allowed to acquire immovable property in India even for a Branch Office. These entities are allowed to lease such property for a period not exceeding five years. (v) Branch / Liaison / Project Offices are allowed to open non-interest bearing INR current accounts in India. Such Offices are required to approach their Authorised Dealers for opening the accounts. (vi) Transfer of assets of Liaison / Branch Office to subsidiaries or other Liaison/Branch Offices is allowed with specific approval of the Central Office of the Reserve Bank. (vii) Branch Offices are permitted to remit outside India profit of the branch net of applicable Indian taxes, on production of the following documents to the satisfaction of the Authorised Dealer through whom the remittance is effected A Certified copy of the audited Balance Sheet and Profit and Loss ac....
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....om India b) Exports to India ii) Particulars of existing arrangements if any, for representing the company in India. iii) Particulars of the proposed Liaison/ Branch Office: a) Details of the activities/ services proposed to be undertaken/ rendered by the office. b) Place where the office will be located. c) Phone number d) E-mail ID e) Expected number of employees (with number of foreigners) 5. i) Name and address of the banker of the applicant in the home country ii) Telephone & Fax Number iii) E-mail ID 6. Any other information which the applicant company wishes to furnish in support of this application. 7. For Non-profit / Non-Government Organisations: (i) Details of activities carried out in the host country and other countries by the applicant organization. (ii) Expected level of funding for operations in India. (iii) Copies of the bye-laws, Articles of Association of the organisation. DECLARATION We hereby declare that: i) The particulars given above are true and correct to the best of our knowledge and belief. ii) Our act....
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....bsp; Place: Date: Annex 2 Format of the Letter of Comfort The Chief General Manager-in-Charge, Reserve Bank of India, Foreign Exchange Department, Foreign Investment Division, Central Office, Fort, Mumbai- 400001. Dear Sir, Sub: Application for establishment of Branch / Liaison Office in India by our subsidiary / group company, M/s_________________________ You may kindly refer to the application made by our subsidiary / group company, M/s_____________________________to your office for establishing Branch / Liaison Office in India. 2. In this connection, we, ______________________(the parent company) undertake to provide the necessary financial support for our subsidiary / group company's operations as a Branch / Liaison Office in India. Any liability that may arise due to the functioning of the Branch/Liaison Office in India will be met by us (the parent company), in case of inability on part of the Branch/Liaison Office to do so. 3. We are also enclosing the financial background of our company in the form of our latest Audited Balance Sheet / Account Statement certified by a Certified Public Accountant. Yours....