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Master Circular on Establishment of Liaison / Branch / Project Offices in India by Foreign Entities

Master Circular on Establishment of Liaison / Branch / Project Offices in India by Foreign Entities - FEMA - 07/2015-16 - Dated:- 1-7-2015 - RBI/2015-16/54 Master Circular No.7/2015-16 July 01, 2015 To, All Category - I Authorised Dealer banks Madam / Sir, Master Circular on Establishment of Liaison / Branch / Project Offices in India by Foreign Entities Establishment of Branch/Liaison/Project Offices in India is regulated in terms of Section 6(6) of Foreign Exchange Management Act, 1999 read wi .....

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ch the Master Circular has been updated is suitably indicated. 4. This Master Circular may be referred to for general guidance. The Authorised Persons and the Authorised Dealer Category - I banks may refer to respective circulars/ notifications for detailed information, if so needed. Yours faithfully, (A.K. Pandey) Chief General Manager INDEX (A) General Criteria - Liaison Office / Branch Office (B) Liaison Office (C) Branch Offices (D) Application for Undertaking Additional Activities or Additi .....

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Foreign Entities (A) GENERAL CRITERIA - LIAISON OFFICE / BRANCH OFFICE 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 (Annex-1) will be considered by Reserve Bank under two routes: Reserve Bank Route - Where principal business of the foreign entity .....

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istry of Finance, Government of India. The following additional criteria are also considered by the Reserve Bank while sanctioning Liaison/Branch Offices of foreign entities: Track Record For Branch Office - a profit making track record during the immediately preceding five financial years in the home country. For Liaison Office - a profit making track record during the immediately preceding three financial years in the home country. • Net Worth [total of paid-up capital and free reserves, .....

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t, Central Office Cell, Reserve Bank of India, New Delhi Regional Office, 6, Parliament Street, New Delhi-110 001, India, 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 .....

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ecommendations 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. .....

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rospective Indian customers. Permission to set up such offices is initially granted for a period of 3 years and this may be extended from time to time by an AD Category I bank. A Liaison Office can undertake the following activities in India: Representing in India the parent company / group companies. Promoting export / import from / to India. Promoting technical/financial collaborations between parent/group companies and companies in India. Acting as a communication channel between the parent c .....

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lidity period of LO/s for a period of 3 years from the date of expiry of the original approval / extension granted by the Reserve Bank, if the applicant has complied with the following conditions and the application is otherwise in order. The LO should have submitted the Annual Activity Certificates for the previous years and The account of the LO maintained with the designated AD Category - I bank is being operated in accordance with the terms and conditions stipulated in the approval. Such ext .....

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of banks and entities engaged in insurance business has to be directly submitted to the Department of Banking Regulations, 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 clo .....

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i. 1Export / 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. Representing the parent company in India and acting as buying / selling agent in India. vi. Rendering services in information technology and development of software in India. vii. Rendering technical support to the pro .....

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taxes. c.2 Branch Office in Special Economic Zones (SEZs) (i) Reserve Bank has given general permission to foreign companies for establishing branch/unit in Special Economic Zones (SEZs) to undertake manufacturing and service activities. The general permission is subject to the following conditions: such units are functioning in those sectors where 100 per cent FDI is permitted; such units comply with part XI of the Companies Act,1956 (Section 592 to 602); such units function on a stand-alone b .....

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sions of the Banking Regulation Act, 1949, from Department of Banking Regulation, Reserve Bank. (D) Application for Undertaking Additional Activities or Additional Branch / Liaison Offices Requests 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 General Manager, Foreign Exchange Department, Central Office Cell, Reserve Bank of India, New Delhi Regional Office, 6, Parliament Street, .....

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(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 format provided in Annex 3 within five working days of the LO/BO becoming functional to the Director .....

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fore 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. [as amended vide AP (DIR) No.55 dated .....

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iven by the Reserve Bank. In the event of any adverse findings being reported by the Auditor or noticed by the designated AD Category -I bank, the same should be reported immediately by the designated AD Category-I bank to the respective Regional Office of the Reserve Bank in respect of LOs and to the Central Office of the Reserve Bank in the case of BOs, along with the copy of the Annual Activity Certificate and their comments thereon. e.3. A copy of the report in Annex 3 shall be filed with th .....

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dicating 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-repat .....

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tive 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. W.r.t the application made by a BO/LO for making remittance of its winding up proceeds, the designated AD Category - I bank may permit the remittance subject to the directions issued by the Reserve Bank .....

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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 general permission to foreign companies to establish Project Offices in India, provided they have secured a contract from an Indian company .....

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India, Central Office, for approval. Setting up of Project Offices by foreign Non-Government Organisations/Non-Profit Organisations/Foreign Government Bodies/Departments, by whatever name called, are under the Government Route. Accordingly, such entities are required to apply to the Reserve Bank for prior permission to establish an office in India, whether Project Office or otherwise. [as amended vide AP (DIR) No.31 dated September 17, 2012] g.2 Opening of Foreign Currency Account AD Category - .....

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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 .....

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e 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 tran .....

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uch a foreign entity, in such cases to each of the DGP concerned of the state where it has established office in India; [as amended vide AP(DIR) No.35 dated September 25, 2012] (ii) The foreign company establishing a Project Office in India is to furnish 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 Numb .....

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g 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 C .....

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, 2012] (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 / registered in Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, 2Hong Kong or Macau can establish in India, a Branch or a Liaison Office or a Project Office or any other place of business. (ii) Entities from Nepal are allowed to establish only Liaison Offices in India. (iii) Branch/Project Offi .....

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activities from lease property subject to lease period not exceeding five years. (iv) Branch / Liaison / Project Offices are allowed to open non-interest bearing INR current accounts in India. Such Offices are required to approach their Authorised Dealers for opening the accounts. (v) 3Powers relating to transfer of assets of Liaison / Branch Office/Project Office have been delegated to AD Category-1 Banks subject to compliance with the following stipulations: Such proposals will be considered o .....

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with regard to initial reporting requirements (para.2.3) and submission of CA certified annual report indicating project status (para.2.4). A certificate is to be submitted from the Statutory Auditor furnishing details of assets to be transferred indicating their date of acquisition, original price, depreciation till date, present book value or WDV value and sale consideration to be obtained. Statutory Auditor should also confirm that the assets were not re-valued after their initial acquisitio .....

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n 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 ac .....

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term deposit is out of temporary surplus funds and the branch / office furnishes an undertaking that the maturity proceeds of the term deposit will be utilised for their business in India within 3 months of maturity. However, such facility may not be extended to shipping/airline companies. (viii) Regularisation of LO / BO established during pre-FEMA period Under the provisions of FEMA 1999 foreign entities are permitted to establish a branch or liaison office in India with permission of the Rese .....

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k designated by the applicant for onward transmission to the General Manager, Foreign Exchange Department, Central Office Cell, Reserve Bank of India, New Delhi Regional Office, 6, Parliament Street, New Delhi-110 001, India 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. Paid-up capital ii) Free Reserves/Retained e .....

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to be undertaken/ rendered by the office. b) Place where the office will be located. c) Phone number d) E-mail ID e) Expected number of employees (with number of foreigners) 5. i) Name and address of the banker of the applicant in the home country ii) Telephone & Fax Number iii) E-mail ID 6. Any other information which the applicant company wishes to furnish in support of this application. 7. For Non-profit / Non-Government Organisations: (i) Details of activities carried out in the host co .....

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he designated AD Category - I bank and the Reserve Bank. In the event of shifting the Office to any other city in India, prior approval of the Reserve Bank will be obtained. iv) We will abide by the terms and conditions that may be stipulated by the Government of India / Reserve Bank / designated AD Category - I bank from time to time. v) We, hereby commit that we are agreeable to a report / opinion sought from our bankers abroad by the Government of India /Reserve Bank. vi) We understand that t .....

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e original Certificate is in a language other than in English, the same may be translated into English and notarized as above and cross verified/attested by the Indian Embassy/ Consulate in the home country]. 2. Latest Audited Balance sheet of 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 ne .....

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r 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 this connection, we, ______________________(the parent company) undertake to provide the necessary financial support for our subsidiary / group company's operations as a .....

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ty Certificate (To be submitted as on March 31,…….on or before April 30,………). To whomsoever it May Concern This is to certify and confirm that during the period from __________________to________________, the Branch/Liaison Office/s with PAN No. -of M/s__________________ (UIN- ) has/ have undertaken only those activities that have been specifically permitted by the Reserve Bank vide its approval letter/s No/s. ______________________________dated______________and .....

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