Open Branch Office of foreign Company Registration in india (2020)| Onfiling
For Foreigner

Branch Offices

Overview

What is Branch Office?

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.

Reporting by Branch/Liaison Offices 

All new entities setting up LO/BO shall submit a report containing information, as per the 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.

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 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 along with the audited financial statements including receipt and payment account. 

The certificates are to be filed by the following offices as applicable:

  • In case of a sole BO/LO, by the BO/LO concerned
  • 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.
  • 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 Activity Certificate, and also with the AD concerned.

Advantages
  • Not a separate legal entity hence cost of compliance is less.
  • Easy repatriation of funds.
  • No Tax on dividends
  • Easy to shut down
Disadvantages
  • Unlimited liability
  • 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

SOURCE: RBI AND FEMA RULES, REGULATIONS AND NOTIFICATIONS

FAQS

No, if an LO/BO wants to open more than one account it has to obtain prior permission of the Reserve Bank through its AD Category I bank justifying the reason for additional account.
Yes, however, BO’s transactions should be restricted to its designated INR account and it should not put any transactions through the agent’s foreign currency account.
Yes provided the bank account is re-designated as a BO account.

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