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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 ..... NDEX (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: Reserve Bank Route Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 information about the company and its products to the prospective Indian customers. Permission to set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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: i. Export / Import of goods. 1 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 informat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Reserve Bank of India as explained above. However, the documents mentioned in form FNC need not be resubmitted, if there 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) 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 offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icate 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 funds for meeting any liability in India will be met by inward remittance from abroad. (ii) Inter-Project transfer of funds requires prior permission of the Regional Office concerned of the Reserve Bank under whose jurisdiction the Project Office is situated. g.4 Reporting requirements (i) The foreign company establishing a Project Office in India is to furnish report through the concerned AD branch, to the concerned Regional Office of Reserve Bank of India under whose jurisdiction the Project Office is set up, incorporating the following details. Name and address of the Foreign Company, Reference Number and date of letter awarding the contract referred to in clause (ii) of Regulation 5 of Notification No. FEMA 22/2000-RB dated May 3, 2000, Particulars of the authority awarding the projects / contract, The total amount of contract, Address / e-mail address / telephone number / fax number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bank. (vi) 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. A Certified copy of the audited Balance Sheet and Profit and Loss account for the relevant year b. A Chartered Accountant s certificate certifying i. the manner of arriving at the remittable profit ii. that the entire remittable profit has been earned by undertaking the permitted activities iii. 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) Regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 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. iii) If we shift the office to another place within the city, we shall intimate the designated AD Category - I bank and the Reserve Bank. In the event of shifting the Office to any other city in India, prior approval of the Reserve Bank will be obtained. iv) We will abide by the terms and conditions that may be stipulated by the Government of India / Reserve Bank / designated AD Category - I bank from time to time. v) We, hereby commit that we are agreeable to a report / opinion sought from our bankers abroad by the Government of India /Reserve Bank. vi) We understand that the approval, if granted, is from FEMA angle only. Any other approvals / clearances, statutory or otherwise, required from any other Government Authority/ Department/ Minist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arent 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. ______________________________dated ______________and has/have complied with the terms and conditions specified in the above mentioned letter/s. _______________________________ (Signature of the Auditor/s) (Name of the Chartered Accountant) ICAI Membership No.: Address: Place: Date: Appendix List of Notifications/Circulars consolidated in this Master Circular http://www.rbi.org.in/scripts/Fema.aspx Sr.No. Notification / Circular No. Date 1 Notification no. FEMA 22/2000-RB May 03, 2000 2 Notification No FEMA 13/2000-RB May 03, 2000 3 Notification No FEMA 21/2000-RB May 03, 2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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