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TMI BlogMaster Circular on Establishment of Liaison / Branch / Project Offices in India by Foreign Entities.X X X X Extracts X X X X X X X X Extracts X X X X ..... ice (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: * Reserve Bank Route -- Where principal business of the foreign entity falls under sectors where 100 per cent Foreign Direct Investment (FDI) is permissible under the automatic route. * Government Route -- Where principal busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fices 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 information about the company and its products to the prospective Indian customers. Permission to set up such offices is initially granted for a period of 3 years and this may be extended from time to time by an AD Category I bank. A Liaison Office can undertake the following activities in India: * i. Represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th 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: * i. Export / Import of goods. * ii. Rendering professional or consultancy services. * iii. Carrying out research work, in areas in which the parent company is engaged. * iv. Promoting technical or financial collaborations between Indian companies and parent or overseas group company. * v. Representing the parent company in India and acting as buying / selling agent in India. * vi. Rendering services in information technology and development of software in India. * vii. Rendering technical support to the products supplied by parent/group companies. * viii. Foreign airline / shipping company. Normally, the Branch Office should be engaged in the activity in which the parent company is engaged. b) Retail trading activities of any nature is not allowed for a Bra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y identify one of its Offices in India as the Nodal Office, which will coordinate the activities of all Offices in India. (E) Annual Activity Certificates to be Submitted by Branch/Liaison Offices Branch Offices / Liaison Offices have to file Annual Activity Certificates (AAC) (Annex 3) 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 reference to a date other than March 31, the AAC along with the audited Balance Sheet may be submitted within six months from the due date of the Balance Sheet to the designated AD Category I bank and a copy to the Directorate General of Income Tax (International Taxation), New Delhi. The certificates are to be filed by the following offices as applicable: (a) In case of a sole BO/LO, by the BO/LO concerned; (b) In case of multiple BO/LO, a combined Annual Activity Certificate in respect of all Offices in India by the Nodal Office of the BO/LOs. The designated AD Category - I bank shall scrutinize the Annual Activity Certificate and ensure that the activities undertaken by the BO/LO are being carried out in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Os), along with a declaration stating that all the necessary documents submitted by the BO / LO have been scrutinized and found to be in order. If the documents are not found in order or cases are not covered under delegated powers, the AD Category - I bank may forward the application to the Reserve Bank, with their observations, for necessary action. All the documents relating to the BO / LO operations may be retained by the AD Category - I bank for verification by the internal auditors of the AD / inspecting officers of the Reserve Bank. (G) PROJECT OFFICE g.1 General Permission Reserve Bank has granted general permission to foreign companies to establish Project Offices in India, provided they have secured a contract from an Indian company to execute a project in India, and * i. the project is funded directly by inward remittance from abroad; or * ii. the project is funded by a bilateral or multilateral International Financing Agency; or * iii. the project has been cleared by an appropriate authority; or * iv. a company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the project. However, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral 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 Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran or China can establish in India, a Branch or a Liaison Office or a Project Office or any other place of business. (ii) Partnership / Proprietary concerns set up abroad are not allowed to establish Branch /Liaison/Project Offices in India. (iii) Entities from Nepal are allowed to establish only Liaison Offices 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 Authoris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the last three years: a) Imports from 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 activities in India would be confined to the activities indicated in column 4(iii) (a) above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch / 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 faithfully, ( ) Authorised Representative of the parent company Annex 3 Annual Activity Certificate (To be submitted as on March 31,…….on or before April 30,………). To whomsoever it May Concern This is to certify and confirm that during the period from __________________to ________________, the Branch/Liaison Office/s with PAN No. ---------------------- of M/s__________________ (UIN- ) has/ have undertaken only those activities that have been specifically permitted by the Reserve Bank vide its approval letter/s No/s. ____________ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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