Project office of Foreign Company in india | Procedure & Business setup (2020) - Onfiling
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Project Offices

Overview

 

What are the General Permission required for Project Office?

RBI has given general permission to foreign companies for establishing Project Offices in India, provided they have secured a contract from an Indian company to establish a project in India, and the project is funded directly by inward remittance from abroad, or the project is funded by a bilateral or multilateral International Financing Agency, or the project has been cleared by an appropriate authority, or 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 the above conditions are not fulfilled, the foreign company has to approach the RBI, Central Office, for its approval.

Establishing of Project Offices by foreign NGO/Foreign Government Bodies/Departments, by whatever name called, comes under the Government Route. Accordingly, such companies are required to apply to the Reserve Bank for prior permission to execute an office in India.


What is the procedure for Opening of Foreign Currency Account?

AD Category – I banks can open non-interest bearing Foreign Currency Account for Project Offices in India subject to the following:

  • The Project Office has been established in India, with the general/specific permission of Reserve Bank, having the requisite approval from the concerned Project Sanctioning Authority concerned.
  • The contract, under which the project has been sanctioned, specifically provides for payment in foreign currency
  • Each Project Office can open two Foreign Currency Accounts, usually, one denominated in USD and other in-home currency, provided both are maintained with the same AD category–I bank.
  • The permissible debits to the account shall be payment of project related expenditure and credits shall be foreign currency receipts from the Project Sanctioning Authority, and remittances from parent/group company abroad or bilateral/multilateral international financing agency.
  • The responsibility of ensuring that only the approved debits and credits are allowed in the Foreign Currency Account shall rest solely with the branch concerned of the AD. Further, the Accounts shall be subject to 100 percent scrutiny by the Concurrent Auditor of the respective AD banks.
  • Foreign Currency accounts have to be closed at the completion of the Project.

Intermittent Remittances by Project Offices in India

AD Category – I bank can permit intermittent remittances by Project Offices pending winding up / completion of the project provided they are satisfied with the bonafide of the transaction, subject to the following:

  • The Project Office submits an Auditors' / Chartered Accountants’ Certificate 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.
  • 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.


    What are the Reporting requirements?

    (i) All new entities setting up Project Offices shall submit a report containing information, as per format provided in Annex 3 within five working days of the PO becoming functional to the Director-General of Police (DGP) of the state concerned in which PO 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

    (ii) The foreign company establishing a Project Office in India is to furnish a 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 of the Project Office
    • Tenure of Project Office
    • Brief details of the Project undertaken
    • AD branch with whom the account has been opened and the foreign currency in which the account is opened.
    • An undertaking to the effect that the Project Office is eligible to avail of the General Permission under Regulation 5(ii) showing the reason thereof.
    • This report shall be forwarded through the AD branch to the Regional Office concerned of the Reserve Bank of India within 2 months of the establishment of the Project Office.

      (iii) The Project Office shall also submit to the AD branch on an annual basis, a Certificate from a Chartered Accountant showing the Project Status and certifying that the accounts of the Project Office has been audited and the activities are undertaken are in conformity with the General / Specific permission given by the Reserve Bank.


      Additional Reporting Requirements

      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 certificate, and also with the AD concerned.

SOURCE: RBI AND FEMA RULES, REGULATIONS AND NOTIFICATIONS

FAQS

The PO remains valid for the entire tenure of the project (till the project is completed or wound up).
Yes, the AD bank should ensure compliance to the extant instructions issued by the Department of Banking Regulation.
• The office shall be opened within 6 months from the date of approval letter. • Extension for 6 months may be granted by AD Category-I bank for reasons beyond the control of the person resident outside India. • Further extension may be granted by RBI only • It takes generally takes 15 days to register a PO.

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