TaxTMI 
TaxTMI 
TaxTMI 
Master Circular on Establishment of Liaison / Branch /Project Offices in India by Foreign Entities
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....ler Category - I banks may refer to respective circulars/ notifications for detailed information, if so needed. Yours faithfully, (C D Srinivasan) Chief General Manager INDEX (A) General Criteria - Liaison Office / Branch Office (B) Liaison Office (C) Branch Offices (D) Application for Undertaking Additional Activities or Additional Branch / Liaison Offices (E) Reporting 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 Format of report to DG of Police Annex 4 Annual Activity Certificate Appendix List of Notifications/Circulars consolidated in this Master Circular Establishment of Branch/Liaison/Project Offices in India by Foreign Entities (A) GENERAL CRITERIA - LIAISON OFFICE / BRANCH OFFICE 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 application....
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....uld exercise due diligence in respect 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 ....
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....re 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 undertake the following activities in India: * Export / Import of goods. * Rendering professional or consultancy services. * Carrying out research work, in areas in which the parent company is engaged. * Promoting technical or financial collaborations between Indian companies and parent or overseas group company. * Representing the parent company in India and acting as buying / selling agent in India. * Rendering services in information technology and development of software in India. * Rendering technical support to the products suppli....
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....ere are no changes to the documents already submitted earlier. * If the number of Offices exceeds 4 (i.e. one BO / LO in each zone viz; East, West, North and South), the applicant has to justify the need for additional office/s. * The applicant may identify one of its Offices in India as the Nodal Office, which will coordinate the activities of all Offices in India. (E) Reporting by Branch/Liaison Offices e.1. All new entities setting up LO/BO shall submit a report containing information, as per format provided in Annex 3 within five working days of the LO/BO becoming functional to the Director General of Police (DGP) of the state concerned in which LO/BO has established its office; if there is more than one office of such a foreign entity, in such cases to each of the DGP concerned of the state where it has established office in India; [ as amended vide AP (DIR) No.35 dated September 25, 2012] e.2. Branch Offices / Liaison Offices have to file Annual Activity Certificates (AAC) (Annex 4) from Chartered Accountants, at the end of March 31, along with the audited Balance Sheet on or before September 30 of that year. In case the annual accounts of the LO/ BO are finalized with....
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....xports) 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, 1956, in case of winding up of the Office in India. * Any other document/s, specified by the Reserve Bank while granting approval. The designated AD Category - I banks has to ensure that the BO / LOs had filed their respective Annual Activity Certificates with the Reserve Bank for the previous years, in respect of the existing Branch/Liaison Offices. Confirmation about the same can be obtained from the Central Office of the Reserve Bank in the case of BOs and from the Regional Office concerned in the case of LOs. Closure of such BO / LO has to be reported by the designated AD Category - I bank to the Reserve Bank (the Regional Office concerned for LOs and Central Office for BOs), along with a declaration stating that all the necessary documents submitted by the BO / LO have be....
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.... be foreign currency receipts from the Project Sanctioning Authority, and remittances from parent/group company abroad or bilateral / multilateral international financing agency. * The responsibility of ensuring that only the approved debits and credits are allowed in the Foreign Currency Account shall rest solely with the branch concerned of the AD. Further, the Accounts shall be subject to 100 per cent scrutiny by the Concurrent Auditor of the respective AD banks. * The Foreign Currency accounts have to be closed at the completion of the Project. g.3 Intermittent Remittances by Project Offices in India (i) AD Category - I bank can permit intermittent remittances by Project Offices pending winding up / completion of the project provided they are satisfied with the bonafides of the transaction, subject to the following: * The Project Office submits an Auditors' / Chartered Accountants' Certificate to the effect that sufficient provisions have been made to meet the liabilities in India including Income Tax, etc. * An undertaking from the Project Office that the remittance will not, in any way, affect the completion of the Project in India and that any shortfall of fund....
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.... Additional Reporting Requirements: A copy of the report in Annex 3 shall be filed with the DGP concerned on annual basis along with a copy of the annual certificate, and also with the AD concerned. [as amended vide AP (DIR) No.35 dated September 25, 2012] (H) Other General Conditions Applicable to Branch / Liaison / Project Offices of Foreign Entities in India (i) Without prior permission of the Reserve Bank, no person being a citizen of / registered in Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, 2Hong Kong or Macau can establish in India, a Branch or a Liaison Office or a Project Office or any other place of business. (ii) Entities from Nepal are allowed to establish only Liaison Offices in India. (iii) Branch/Project Offices of a foreign entity are permitted to acquire immovable property by way of purchase for their own use and to carry out permitted/incidental activities. However, entities from Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, Bhutan or China are not allowed to acquire immovable property in India for a Branch / Project Office without prior RBI approval. All Branch / Project Offices including Liaison Offices, have general permission to carr....
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....the satisfaction of the Authorised Dealer through whom the remittance is effected a. A Certified copy of the audited Balance Sheet and Profit and Loss account for the relevant year b. A Chartered Accountant's certificate certifying * the manner of arriving at the remittable profit * that the entire remittable profit has been earned by undertaking the permitted activities * that the profit does not include any profit on revaluation of the assets of the branch. (vii) Authorised Dealers can allow term deposit account for a period not exceeding 6 months in favor of a branch/office of a person resident outside India provided the bank is satisfied that the term deposit is out of temporary surplus funds and the branch / office furnishes an undertaking that the maturity proceeds of the term deposit will be utilised for their business in India within 3 months of maturity. However, such facility may not be extended to shipping/airline companies. (viii) Regularisation of LO / BO established during pre-FEMA period Under the provisions of FEMA 1999 foreign entities are permitted to establish a branch or liaison office in India with permission of the Reserve Bank of India. Liaison / B....