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Master Direction - Establishment of Branch Office (BO)/ Liaison Office (LO)/ Project Office (PO) or any other place of business in India by foreign entities (Updated as on May 18, 2021)

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..... contours of the Regulations, Reserve Bank of India also issues directions to Authorised Persons under Section 11 of the Foreign Exchange Management Act (FEMA), 1999 . These directions lay down the modalities as to how the foreign exchange business has to be conducted by the Authorised Persons with their customers/constituents with a view to implementing the regulations framed. 3. This Master Direction consolidates the existing instructions on the subject of Establishment of branch office/ liaison office / project office or any other place of business in India by foreign entities at one place. Reporting instructions can be found in Master Direction on reporting (Master Direction No. 18 dated January 1, 2016) 4. It may be noted that, whenever necessary, Reserve Bank shall issue directions to Authorised Persons through A.P. (DIR Series) Circulars in regard to any change in the Regulations or the manner in which relative transactions are to be conducted by the Authorised Persons with their customers/ constituents. The Master Direction issued herewith shall be amended suitably simultaneously. Yours faithfully, (Ravinder Singh Amar) Chief General Manager .....

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..... ing. However, prior approval of Reserve Bank of India shall not be required in cases where Government approval or license/permission by the concerned Ministry/Regulator has already been granted. Further, in the case of proposal for opening a PO relating to defence sector, no separate reference or approval of Government of India shall be required if the said non-resident applicant has been awarded a contract by/ entered into an agreement with Ministry of Defence or Service Headquarters or Defence Public Sector Undertakings. The term permission used in the Government of India Notification dated January 21, 2019 does not include general permission, if any, available under Foreign Direct Investment in the automatic route, in respect of the above four sectors. The applicant is a Non-Government Organisation (NGO), Non-Profit Organisation, Body/ Agency/ Department of a foreign government. However, if such entity is engaged, partly or wholly, in any of the activities covered under Foreign Contribution (Regulation) Act, 2010 (FCRA), they shall obtain a certificate of registration under the said Act and shall not seek permission under FEMA 22(R) 3 . iii. The non-resident e .....

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..... al letter to the non-resident entity for establishing BO/LO in India. This is in order to enable the Reserve Bank to keep, maintain and upload up-to-date list of all foreign entities which have been granted permission for establishing BO/LO in India, on its website. iii. The validity period of an LO is generally for three years, except in the case of Non-Banking Finance Companies (NBFCs) and those entities engaged in construction and development sectors, for whom the validity period is two years only. The validity period of the project office is for the tenure of the project. iv. There is a general permission to non-resident companies to establish POs in India, provided they have secured a contract from an Indian company to execute a project in India. Also, the project must have secured the necessary regulatory clearances; andis funded directly by inward remittance from abroad; or the project is funded by a bilateral or multilateral International Financing Agency, 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. v. An applicant that has received a permission for setting up .....

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..... dits and Debits to the account shall be: a. Credits Funds received from Head Office through normal banking channels for meeting the expenses of the office. Refund of security deposits paid from LO s account or directly by the Head Office through normal banking channels. Refund of taxes, duties etc., received from tax authorities, paid from LO s bank account. Sale proceeds of assets of the LO. b. Debits Only for meeting the local expenses of the office. ii. A BO may approach any AD Category-I Bank in India to open an account for its operations in India. Credits to the account should represent the funds received from Head Office through normal banking channels for meeting the expenses of the office and any legitimate receivables arising in the process of its business operations. Debits to this account shall be for the expenses incurred by the BO and towards remittance of profit/winding up proceeds. iii. Any foreign entity except an entity from Pakistan who has been awarded a contract for a project by the Government authority/Public Sector Undertakings or are permitted by the AD to operate in India may open a bank account without .....

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..... dings reported by the auditor or noticed by the designated AD Category -I bank, the same should immediately be reported to the General Manager, Reserve Bank of India, CO Cell, New Delhi, along with the copy of the AAC and their comments thereon. 5. Extension of validity period of the approval of LO and PO i. Requests for extension of time for LOs may be submitted before the expiry of the validity of the approval, to the AD Category-I bank concerned under whose jurisdiction the LO/nodal office is located. The designated AD Category - I bank may extend the validity period of LO/s for a period of 3 years from the date of expiry of the original approval / extension granted 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 letter. Such extension has to be granted, as expeditiously as possible and in any case not later than one month from the receipt of .....

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..... I bank at the earliest. ii. Requests for undertaking activities in addition to what has been permitted initially (Annex C) by Reserve Bank of India/ AD Category-I bank may be submitted by the applicant to the Reserve Bank through the designated AD Category -I bank justifying the need. 8. Extension of fund and non-fund based facilities AD Category-I bank, may, based on their business prudence, Board approved policy and compliance to extant rules/regulations stipulated by DBR, RBI extend fund/non-fund based facilities to BOs/POs only. 9. Remittance of profit/surplus i. BOs 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 AD Category-I bank 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; and that the profit does not include any profit on r .....

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..... banks and insurance companies, after obtaining copies of permission of closure from the sectoral regulators along with the documents mentioned above. 11. Transfer of assets of BO/LO/PO Proposals for transfer of assets may be considered by the AD Category-I bank only from BOs/LOs/POs who are adhering to the operational guidelines such as submission of AACs (up to the current financial year) at regular annual intervals with copies endorsed to DGIT (International Taxation); have obtained PAN from IT Authorities and have got registered with ROC under the Companies Act 2013, if necessary. Also, Transfer of assets by way of sale to the JV/WoS be allowed by AD Category-I bank only when the non-resident entity intends to close their BO/LO/PO operations in India. 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 written down value (WDV) value and sale consideration to be obtained. Statutory Auditor should also confirm that the assets were not re-valued after their initial acquisition. The sale consideration .....

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..... activities from leased property subject to lease period not exceeding five years. AD Category-I bank can allow term deposit account for a period not exceeding 6 months in favour of a BO/LO/PO of a person resident outside India provided the bank is satisfied that the term deposit is out of temporary surplus funds and the BO/LO/PO 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. In case a BO/LO has been established and continues to exist without approval of the Reserve Bank, such BO/LO may approach their AD Category-I bank to regularise their offices under FEMA 1999, even if permission of Reserve Bank was not required as per the regulations existing at the time of setting up of the office. Such cases may be brought to the notice of Reserve Bank immediately for allotment of UIN. The foreign entities who may have established LO or BO with the permission from the Government of India in the pre-FEMA period shall also approach their AD Category I bank with a copy of the said approval for allotment of a .....

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..... on office/project office in India [This application form shall be completed and submitted to the AD Category-I bank designated by the applicant along with the documents mentioned in item (viii) of the Declaration.] Part I No. Details Particulars 1. i. Full name and address of the applicant ii. Date and Place of incorporation / registration iii. Telephone Number(s) iv. Fax Number(s) v. E-mail ID 2. i. Details of capital ii. Paid-up capital iii. Free Reserves/Retained earnings as per last audited Balance Sheet/Financial Statement iv. 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: Imports from India Exports to India ii. Particulars of existing arrangements if any, for representing the company in India iii. Particulars of the proposed liaison/ branch office: Details .....

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..... number III. Details of shareholders of applicant company (All firms/companies/entities/individuals having shareholding more than 10 %) Sr. No Full name Parentage Father/ Mother Date of birth Permanent address Present address Present position held Nationality (if holding dual nationality, both must be clearly mentioned) % of shares held in the company IV. Details of criminal cases, if any, against the company / Director (s): a. Name; address and registration number of the company : b. Name and address of owners, promoters and directors of the company: c. Is the company owners, promoters or directors listed above, the subject of any Preventive detention proceedings : Yes/No Criminal proceedings : Yes/No d. If, Yes, please provide the following details Detention/case/FIR/warrant number Police station/District/Agency Section of law Name and place of the court The above mentioned details are in respect of both India and any other foreign country DECLARATIO .....

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..... 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] 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. Power of Attorney in favour of signatory of Form FNC in case the Head of the overseas entity is not signing the Form FNC. (Signature of Authorised Official of the Applicant Company) Name : Designation : Place : Date : Annex C Permitted activities for a branch office in India of a person resident outside India Normally, the branch office should be engaged in the activity in which the parent company is engaged. Export/import of goods. Rendering professional or consultancy services (other than practice of legal profession in any matter). Carrying out research work in which the parent company is engaged. Promoting technical or financial collaborations between Indian companies and parent or overseas group company. Representing the parent company in Ind .....

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..... 0 February 27, 2019 5 Notification No. FEMA 22(R)(2)/2019-RB January 21, 2019 6 AP DIR Series Circular No. 27 March 28, 2019 7 AP DIR Series Circular No.07 November 23, 2020 1 Notification No. FEMA 22/2000-RB dated May 3, 2000, on Foreign Exchange Management (establishment in India of Branch or office or other place of business) Regulation was repealed and replaced by Notification No. FEMA 22(R)/2016-RB dated March 31, 2016 with effect from March 31, 2016. 2 Modified vide Notification No. FEMA 22(R)(2) dated January 21, 2019 and AP (DIR Series) Circular No. 27 dated March 28, 2019. Prior to modification, it read as The principal business of the applicant falls in the four sectors namely Defence, Telecom, Private Security and Information and Broadcasting. In the case of proposal for opening a PO relating to defence sector, no separate reference or approval of Government of India shall be required if the said non-resident applicant has been awarded a contract by/ entered into an agreement with Ministry of Defence or Service Headquarters or Defence Public Sector Undertakings. No separat .....

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