What is a branch office of foreign entity ?
Foreign companies willing to conduct full-fledged business in India can set up a Branch Office (“BO”) in India . BO can carry the same or substantially the same trading activities as carried out by their parent or group companies. However, BO is not allowed to directly carry out manufacturing activities . A BO is treated as a foreign entity and taxed @ 40% Income Tax BO can remit outside India profit of the branch net of applicable Indian taxes on production of prescribed documents ti AD-I category bank RBI approval is required for each branch and each activity carried on by the branc office
4 Point Requirement Checklist
Net Worth and Profit record of parent Company
There must be a profit making track record of 5 years in the home country and net worth must be >= USD 1,00,000. In case of failure to meet the above criteria, we can help you in a lawful manner.
Attestation / Apostille
All documents of foreign origin and those executed in a foreign territory namely Financial Statements , MOA / AOA, Certificate of Incorporation , Board R4esolutions need to be legalised by way of apostille by Consulate of Indian Embassy or attestation by Foreign Public Notary.
Person authorised in India
The parent company must pass a resolution authorising a person in India to file various forms and documents on their behalf. Such person must have PAN and DSC.
Permissible activities in India
RBI has provided an exhaustive list of activities permissible to be carried on by an BO In India.BO is permitted to represent the parent / group companies and undertake the activities listed here. (PDF Link)
Steps for Branch Office Set-up
Check eligibility as per the 4 point checklist
The establishment of BO is governed by the Foreign Exchange Management (Establishment in India of a branch office ) Regulations, 2016 which lay down the following financial qualifications::
- The networth of the company in home country must be above $ 100,000
- The applicant company should have profitability track record of Five Years.
Also, RBI has provided an exhaustive list of 8 activities permissible to a BO 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 supplied by parent/group companies.
- Foreign airline / shipping company.
RBI has prohibited the following activities:
b) Retail trading activities of any nature
c) Manufacturing or processing activities in India, directly or indirectly.
The Company must provide the complete list of documents <Link below> for smooth service delivery. Impeccable and complete documentation forms the base of transactions with RBI.
Hence on receipt of documents from you, we will prepare the following for your signature
Board Resolution to set up Branch Office in India
Board Resolution appointing an Authorised Representative ( AR) in India
Declaration from the applicant on FDI eligibility and source of fund
Declaration about the nature of the activity,
Declaration on the location of the activity of proposed LO i.e. proof of registered address
Letter of Comfort form holding company if applicable
Designating bank branch as your AD Category -I Bank for your BO
Legalisation of Documents
All documents of foreign origin and those executed in a foreign territory need to be legalised by way of apostille by Consulate of Indian Embassy or attestation by Foreign Public Notary.
KYC , DSC, DIN of AR
The Information Technology Act, 2000 has provisions for use of Digital Signatures on the documents submitted in electronic form. Under e-Governance program, all applications to the RBI must be filed in digital format authenticated by the digital signature of the authorised representative .Hence obtaining DSC becomes a pre requisite for incorporation process
File The application for establishing BO along with the prescribed documents through a designated AD Category – I bank to the Foreign Exchange Department, Central Office Cell, Reserve Bank of India (RBI) New Delhi
Since our office is based in New Delhi itself, it becomes easy for us to provide good service. Also, we have excellent relation with various banks of national repute which enables us to provide prompt service
Verification of application
After FNC Form is filed with the AD Bank, a request for verification of documents is sent to the banker of the foreign company. This process is also known as swift based verification. After receipt of confirmation of the documents from the foreign banker, AD Category-I bank shall after exercising due diligence in respect of the applicant’s background, and satisfying itself as regards adherence to the eligibility criteria for establishing BO, antecedents of the promoter, nature and location of activity of the applicant, sources of funds, etc., and compliance with the extant KYC. The RBI/AD Banker may seek clarification or any additional document which need to be submitted.
Grant of RBI approval and UIN
RBI has delegated the power of approval for BO to AD Category Banks itself. Yet, the AD Category-I bank shall forward a copy of the Form FNC along with the details of the approval proposed to be granted by it to the General Manager, Reserve Bank of India. On being satisfied, RBI will allot a Unique Identification Number (UIN) to each BO. After receipt of the UIN from the Reserve Bank, the AD Category-I bank shall issue the approval letter to the non-resident entity for establishing BO. This is the equivalent of certificate of Incorporation and CIN in Indian companies. The permission once granted remain valid for six months and you may apply for the extension of the same if required
PAN Card, Tax Deduction Number
PAN, or permanent account number, is a unique 10-digit alphanumeric identity allotted to each taxpayer by the Income Tax Department under the supervision of the Central Board of Direct Taxes. Its used as a universal identification key to track financial transactions that might have a taxable component to prevent tax evasion. Anybody who earns a taxable income in India, including foreign nationals who pay taxes here must apply for PAN.
Bank A/c Opening
BO will open a Bank account with designated AD Category-I Bank in India. Funds received from Head Office ,receivables arising in the process of its business operations and all expenses will be incurred from this bank account.
Registration with the ROC
After the establishment of Project Office in India foreign companies shall within 30 days the relevant e-form with MCA Form FC-1 must be filed along with prescribed documents
Registration with State Police
Applicants from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau or Pakistan desirous of opening BO/LO/PO in India shall have to register with the state police authorities and forward such approval letter to AD Bank.
From Holding Company
- Copy of the Certificate of Incorporation / Registration
- Memorandum of Association and Articles of Association attested by the Notary Public in the country of registration
- Complete Address details of the parent company outside India
- List of Details in respect of Directors/Key Executives
- Details of shareholders of the applicant company
- A Certificate from Banker of the parent company stating the commencement date and no default statement as per the prescribed format
- Resolution authorising person in India to file Form FNC-1.
- Resolution to open bank account in India (English) (On the Company letterhead).
- Resolution to open branch office in India (English) (On the Company letterhead).
- Audited copy of last 5 years balance sheet of Parent Company. (English)
- Net worth certificate attested by Certified Public Accountant (CPA)
- Bank details of the parent company
- Proof of registered office
From Authorised Representative (AR)
- Colour photo – 5
- Passport copy -5
- Business Visa Copy with Immigration Stamp of arrival
- National Identity Card – 5 Copy
- Latest Address Proof (Bank Statement/ Electricity/ Water Bill/ Phone Bill)
- Board Resolution Appointing the AR
- Power of Attorney in the name of AR
- An brief on business activity to be done at liaison office.
- A list of the directors and secretary of the company containing such particulars as may be prescribed
- The name and address or the names and addresses of one or more persons resident in India authorized to accept on behalf of the company service
of process and any notices or other documents required to be served on the company
- Particulars of opening and closing of a place of business in India on earlier occasion
- A certified copy of the charter, statutes