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A branch office works in the same way as a parent corporation. The offices are located throughout India and are established to carry out similar commercial operations as the worldwide parent company. The biggest hurdle is the incapacity to engage in manufacturing operations that may be outsourced to Indian firms.
What are Branch Offices?
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 companies.
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.
What are the Documents required for the registration of Branch Office?
In the process of registering a Branch Office, precise and correct documentation is necessary. As a result, documentation must be current and valid. Documents from the parent company are required.
Certificate of Incorporation of the company
Memorandum of Association and Articles of Association of the Parent Company
Complete list of the company's directors and key executives
Full list of the applicant company's shareholders
Net Worth Certificate that must be attested by a Certified Public Accountant
Financial statements of the last five years that have been audited
A report from the applicant's banker in the host country
Forms And Documents Required for The Government
The applicant company and the authorised signatory must generate the following documents for signing purposes.
Resolution of the Board of Directors approving the establishment of a branch office in India
The applicant made a declaration on FDI eligibility and funding source.
A statement about the kind of the business's operation, as well as the location of the planned BO's activity.
A statement on the type of the business activity and the business entity's location.
Fill out the FNC form.
What is the registration process of a Branch Office?
Application to the Reserve Bank of India (RBI) through AD Bank
Form FNC is required for establishing a branch office. The application is submitted through AD Bank to the Reserve Bank of India (Authorised Dealer Category 1 prescribed by RBI). The AD bank plays a crucial role since it is through them that all contact with the RBI is routed.
Approval from the RBI
In the RBI's special cases, the AD bank needs prior clearance. The automatic route is available to businesses whose primary economic activity is in industries where 100 percent FDI is permitted. The situations in which the bank need prior clearance;
The applicant is a citizen of Pakistan, Afghanistan, Iran, China, Bangladesh, Sri Lanka, Hong Kong, or Macau, and the application is for the establishment of a BO/LO/PO in the North East area, Jammu and Kashmir, or the Andaman and Nicobar Island
The four main commercial sectors are telecommunications, private security, defence, and information and broadcasting.
The applicant is a Non-Governmental organization.
Verification from Banker and Approval from the RBI
An application for document scrutiny will be addressed to the foreign company's banker. The application will go forward for approval as soon as the foreign banker confirms the paperwork. As soon as the application receives approval to open the Branch Office, the applicant must notify AD Category 1 Bank. The AD Category 1 Bank will also notify the RBI about this.
ROC Registration of a Branch Office
Within 30 days of receiving RBI clearance to open a branch office in India, a foreign business must file an application in form FC-1 for branch office registration in India.
What are the Advantages of Branch Office?
Not a separate legal entity hence cost of compliance is less.
Easy repatriation of funds.
No Tax on dividends
Easy to shut down
What are the disadvantages of Branch Office?
Requires reporting of Global accounts before Indian authorities
May lead to being treated as “PE”
Higher tax rate
Future collaboration with Indian investor/partner is not possible
Cannot borrow funds from Indian financial institutions