Terms & condition for Approval for opening a branch office or a liaison office or a project office or any other place of business in India - FEMA Ready Reckoner - FEMA

Terms condition for Approval for opening a branch office or a liaison office or a project office or any other place of business in India Regulation 4 define the terms condition for approval for opening a branch office or a liaison office or a project office or any other place of business in India Eligibility Person A person resident outside India can establish a branch office or a liaison office in India provided its fulfil the following condition For Branch Office - A profit making track record during the immediately preceding five financial years in the home country and net worth of not less than USD 100,000 or its equivalent. For Liaison Office - A profit making track record during the immediately preceding three financial years in the home country and net worth of not less than USD 50,000 or its equivalent. For a company that is not financially sound and are subsidiaries of other companies may submit a Letter of Comfort ( Annex A ) from their parent company subject to the condition that the parent company satisfies the prescribed criterion for net worth and profit. Permissible activities :- A person resident outside India permitted by the Reserve Bank under these Regulations to establish a branch or liaison office in India may undertake or carry on any activity specified in Schedule I or Schedule II (Annex B) , as the case may be, but shall not undertake or carry on any other activity unless otherwise specifically permitted by the Reserve Bank. Application time limit for opening office Application form for establish a branch office or a liaison office or a project office or any other place of business in India shall submit an application in Form FNC ( Annex C ) to an Authorised Dealer Category-I bank who grant approval as per directions and/or guidelines issued by the Reserve Bank in this regard. Time limit for opening office:- In case no office is opened by the person resident outside India within six months from the date of approval letter , the approval for establishing the office in India shall be cancelled . Further Extension, where the person resident outside India is not able to open the office within the stipulated time frame due to reasons beyond their control, the Authorised Dealer Category-I bank may consider granting extension of time for setting up the office by a further period of six months . Any further extension of time shall require the prior approval of the Reserve Bank in this regard. Application for opening Additional offices A person resident outside India desiring to establish additional branch office or liaison office may submit to the Authorised Dealer Category-I bank a fresh FNC ( Annex C ) Form along with the justification for the need for additional office/s . Extension of the validity period for liaison office A person resident outside India may establish in India under these Regulations a liaison office for a period of three years subject to the provisions of Regulation 4 d (III). The non-resident entity may apply to the Authorised Dealer Category-I bank concerned f or extension of the validity period of approval , and upon receipt of such an application, the Authorised Dealer Category-I bank concerned may extend the validity period of approval for a period of three years from the date of expiry of the original approval / extension granted , subject to such directions issued by the Reserve Bank in this regard. The application for extension of the validity period of the liaison office of banks has to be directly submitted to the Department of Banking Regulation (DBR),Reserve bank. The application for extension of validity period of the entities engaged in insurance business has to be directly submitted to the Insurance Regulatory and Development Authority (IRDA). Entities engaged in construction and development sectors and which are Non-Banking Finance Companies are permitted to open a Liaison Office for two years only . No further extension would be considered for liaison offices of entities which are Non-Banking Finance Companies and those engaged in construction and development sectors (excluding infrastructure development companies). Upon expiry of the validity period , the offices shall have to either close down or be converted into a Joint Venture / Wholly Owned Subsidiary in conformity with the extant Foreign Direct Investment policy. Project office open to execute a project in India I. A foreign company may open project office/s in India provided it has secured from an Indian company, a contract 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. Explanation: i. 'a bilateral or multilateral International Financing Agency' means the World Bank or the International Monetary Fund or similar other body. ii. Public Financial Institution is a public financial institution as defined in Section 4A of the Companies Act, 1956 . II. Approval for specific country open a project offices:- A person from any country other than Pakistan who has been awarded a contract for a project by a Government Authority/ Public Sector Undertaking may open a bank account with an Authorised Dealer Category-I bank without any prior approval from the Reserve Bank. Restriction on certain Non-citizens business in India Registration with State Police Authorities Regulation 4 claues g provides that, without prior permission of the Reserve Bank Citizens of the following countries shall not establish in India, a branch or a liaison office or a project offices or any other place of business by whatever name called. Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau shall have to register with the concerned State Police Authorities. Copy of approval letter for persons from these countries shall be marked by the AD Category-I bank to the Ministry of Home Affairs, Internal Security Division-I, Government of India, New Delhi. Fund/non-fund based facilities Authorised Dealer Category-I bank may extend fund and/or non-fund based facilities to branch office and project offices based on the guidelines issued by the Reserve Bank in this regard. Remittance of profit or surplus, Acquisition of property and Transfer of Assets of by the branch outside India Remittance of Profit or surplus I. Branch office may 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 Category-I bank through whom the remittance is effected: A certified copy of the audited Balance Sheet and Profit and Loss account for the relevant year. A Chartered Accountant s certificate certifying 1. the manner of arriving at the remittable profit; 2. that the entire remittable profit has been earned by undertaking the permitted activities and 3. that the profit does not include any profit on revaluation of the assets of the branch. II. Authorised Dealer Category I bank may permit intermittent remittances by project offices pending winding up / completion of the project subject to submission of the following: i. certified copy of the final audited project accounts; ii. the statutory auditor s certificate showing the manner of arriving at the remittable surplus and confirming that sufficient provisions have been made to meet the liabilities in India including Income Tax, etc.; and iii. 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. Acquisition of property Acquisition of property by branch office/project office shall be governed by the guidelines issued under Foreign Exchange Management (Acquisition and transfer of immovable property outside India) Regulations,2015 this regulation suppressed by the Foreign Exchange Management (Overseas Investment) Regulations, 2022 [ Notification G.S.R. 646 (E) - Dated: 22-8-2022 ] Transfer of assets A person resident outside India permitted under these Regulations to establish a branch office or liaison office or project office may apply to the concerned Authorised Dealer Category-I bank for transfer of its assets to a Joint Venture/Wholly Owned Subsidiary or any other entity in India. Authorised Dealer Category-I bank shall be guided by the instructions laid down by Reserve Bank in this regard. Annual Activity Certificate (AAC) Where annual account of office finalized as on 31st March The branch office/liaison office may submit the Annual Activity Certificate ( Annex D ) as at the end of March 31 along with the audited financial statements including receipt and payment account on or before September 30 of that year . Where annual account of office finalize other than 31st March The annual accounts of the office are finalized with reference to a date other than March 31, the Annual Activity Certificate (AAC) along with the audited financial statements may be submitted within six months from the due date of the Balance Sheets to the Authorised Dealer Category-bank and the Director General of Income Tax (International Taxation), Drum Shape Building, I.P. Estate, New Delhi 110002. Annual Activity Certificate (AAC) from a Chartered Accountant showing the project status and certifying that the accounts of the project office have been audited and the activities undertaken are in conformity with the general/ specific permission given by the Reserve Bank may be submitted by the project office to the designated Authorised Dealer Category-I bank.