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 ..... arge INDEX (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 (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due diligence in respect of the applicant s background, antecedents of the promoter, nature and location 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctively as stipulated by them, as hitherto. Further, no extension would be considered for LOs of entities which are NBFCs and 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. 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. Repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for establishing additional BO / LOs may be submitted through fresh FNC form (Annex 1), duly signed by the authorized signatory of the foreign entity in the home country 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing approval. The designated AD Category - I banks has to ensure that the BO / LOs had filed their respective Annual Activity Certificates with the Reserve Bank for the previous 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 gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding up / completion of the project provided they are satisfied with the bonafides 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. (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. (H) Other General Conditions Applicable to Branch / Liaison / Project Offices of Foreign Entities in India (i) Without prior permission of the Reserve Bank, no person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran or China can establish in India, a Branch or a Liaison Office or a Project Office or any other place of business. (ii) Partnership / Proprietary concerns set up abroad are not allowed to establish Branch /Lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s: The application form shall be completed and submitted to the AD Category - I bank designated by the applicant for onward transmission to the Chief General Manager-in -Charge, Reserve Bank, Foreign Exchange Department, Foreign Investment Division, Central Office, Fort, Mumbai 400001 along with the documents mentioned in item (viii) of the Declaration. No. Details Particulars 1. Full name and address of the applicant. Date and Place of incorporation / registration Telephone Number(s) Fax Number(s) E-mail ID 2. Details of capital i) Paid-up capital ii) Free Reserves/Retained earnings as per last audited Balance Sheet/Financial Statement iii) Intangible assets, if any 3. Brief description of the activities of the applicant. 4. i) Value of goods imported from and / or exported to India by the applicant during each of the last three years: a) Imports from India b) Exports to India ii) Particulars of existing arrangements if any, for representing the company in India. iii) Particulars of the proposed Liaison/ Branch Office: a) Details of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applicant company. [ If the applicants home country laws/regulations do not insist on auditing of accounts, an Account Statement certified by a Certified Public Accountant (CPA) or any Registered Accounts Practitioner by any name, clearly showing the net worth may be submitted ] 3. Bankers' Report from the applicant s banker in the host country / country of registration showing the number of years the applicant has had banking relations with that bank. (Signature of Authorised Official of the Applicant Company) Name: Designation: Place: Date: Annex 2 Format of the Letter of Comfort The Chief General Manager-in-Charge, Reserve Bank of India, Foreign Exchange Department, Foreign Investment Division, Central Office, Fort, Mumbai- 400001. Dear Sir, Sub: Application for establishment of Branch / Liaison Office in India by our subsidiary / group company, M/s_________________________ You may kindly refer to the application made by our subsidiary / group company, M/s_____________________________to your office for establishing Branch / Liaison Office in India. 2. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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