TMI BlogMaster Circular on Establishment of Liaison / Branch /Project Offices in India by Foreign EntitiesX X X X Extracts X X X X X X X X Extracts X X X X ..... The Authorised Persons and the Authorised Dealer Category - I banks may refer to respective circulars/ notifications for detailed information, if so needed. Yours faithfully, (C D Srinivasan) Chief General Manager INDEX (A) General Criteria - Liaison Office / Branch Office (B) Liaison Office (C) Branch Offices (D) Application for Undertaking Additional Activities or Additional Branch / Liaison Offices (E) Reporting 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 Format of report to DG of Police ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fort, Mumbai-400 001, along with the prescribed documents including English version of the Certificate of Incorporation / Registration or Memorandum Articles of Association attested by Indian Embassy / Notary Public in the Country of Registration. Latest Audited Balance Sheet of the applicant entity. Applicants who do not satisfy the eligibility criteria and are subsidiaries of other companies can submit a Letter of Comfort from their parent company as per Annex -2, subject to the condition that the parent company satisfies the eligibility criteria as prescribed above. The designated AD Category - I bank should exercise 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... timation to the Regional Office concerned of the Reserve Bank and to the Chief General Manager-in-Charge, Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai, 400 001, quoting the reference number of the original approval letter and the UIN. The application for extension of the validity period of the LOs of banks and entities engaged in insurance business has to be directly submitted to the Department of Banking Operations and Development, Reserve Bank and Insurance Regulatory and Development Authority (IRDA), respectively 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for undertaking activities in addition to what has been permitted initially by the Reserve Bank may be submitted through the designated AD Category -I bank to the Chief General Manager-in-Charge, Reserve Bank of India, Foreign Exchange Department, Foreign Investment Division, Central Office, Mumbai, justifying the need with comments of the designated AD Category - I bank. Requests 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) Reporting by Branch/Liaison Offices e.1. All new entities setting up LO/BO shall submit a report containing information, as per for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the company has to approach the designated AD Category - I bank with the following documents: Copy of the Reserve Bank's permission/ approval from the sectoral regulator(s) for establishing the BO / LO. Auditor s certificate- i) indicating the manner in which the remittable amount has been arrived at and supported by a statement of assets and liabilities of the applicant, and indicating the manner of disposal of assets; ii) confirming that all liabilities in India including arrears of gratuity and other benefits to employees, etc., of the Office have been either fully met or adequately provided for; and iii) confirming that no income accruing from sources outside India (including proceeds of exports) has remained un-repatriated to India. No-objection / Tax Clearance Certificate from Income-Tax authority for the remittance/s. Confirmation from the applicant/parent company that no legal proceedings in any Court in India are pending and there is no legal impediment to the remittance. A report from the Registrar of Companies regarding compliance with the provisions of the Companies Act, 1956 , in case of winding up of the Office in India. Any other document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egory - 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 per cent scrutiny by the Concurrent Auditor of the respective AD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the effect that the Project Office is eligible to avail of the General Permission under Regulation 5(ii) to RBI Notification No.22/2000 - RB dated May 3, 2000 read with Notification No. FEMA 95 dated July 2, 2003 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 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 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. [as amended vide AP (DIR) No.35 dated September 25, 2012 ] (H) Other General Conditions Applicable to Branch / Liaison / Project Offices of Foreign Entities in India (i) Without prior permission of the Reserve Bank, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the book value in each case. The assets should have been acquired by the LO/BO/PO from inward remittances and no intangible assets such as good will, pre-operative expenses should be included. No revenue expenses such as lease hold improvements incurred by LO/BOs can be capitalised and transferred to JV/WOS. AD bank to ensure payment of all applicable taxes while permitting transfer of assets. Transfer of assets to be allowed by AD banks only when the foreign entity intends to close their LO/BO/PO operations in India. Credits to the bank accounts of LO/BO/PO on account of such transfer of assets will be treated as permissible credits. (vi) Branch Offices are permitted to 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 through whom the remittance is effected a. A Certified copy of the audited Balance Sheet and Profit and Loss account for the relevant year b. A Chartered Accountant s certificate certifying the manner of arriving at the remittable profit that the entire remittable profit has been earned by undertaking the permitted activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DIR series) Circular No. 37 Nov. 15, 2003 12 A.P. (DIR series) Circular No. 58 Jan. 16, 2004 13 A.P. (DIR series) Circular No. 39 April 25, 2005 14 A.P. (DIR series) Circular No. 44 May 17, 2005 15 A.P. (DIR series) Circular No. 02 July 31, 2008 16 A.P. (DIR series) Circular No. 23 December 30, 2009 17 A.P. (DIR series) Circular No. 24 December 30, 2009 18. A.P. (DIR series) Circular No. 06 August 09, 2010 19 A.P. (DIR series) Circular No. 02 July 15, 2011 20 A.P. (DIR series) Circular No. 76 February 9, 2012 21. A.P. (DIR series) Circular No. 88 March 1, 2012 22. A.P. (DIR series) Circular No. 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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