Branch Office in India

Opening of Branch Office in India by Foreign Entity

Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up Branch Office in India. A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer.
 

A body corporate incorporated outside India (including a firm or other association of individuals), desirous of opening a Branch Office (BO) in India have to obtain permission from the Reserve Bank under provisions of FEMA 1999 through AD Bank. The applications from such entities in Form FNC will be considered by Reserve Bank under two routes:

 

Bank under two routes:

 

• Reserve Bank Route - Where principal business of the foreign entity falls under sectors where 100 per cent Foreign Direct Investment (FDI) is permissible under the automatic route.

 

• Government Route - Where principal business of the foreign entity falls under the sectors where 100 per cent FDI is not permissible under the automatic route. Applications from entities falling under this category are considered by the Reserve Bank of India (RBI) in consultation with the Ministry of Finance, Government of India.

 

The RBI has prescribed  following criteria for sanctioning Branch Offices of foreign entities :

  • It must have profit making track record during the immediately preceding 5 financial years in the home country.
  • Total net worth of the applicant foreign entity should not less than USD 100,000 or equivalent i.e. Paid-Up Capital + Free Reserves - Intangible Assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name.

The application along with the prescribed documents including shall be forwarded through AD bank to General Manager, Foreign Exchange Department, Central Office Cell, Reserve Bank of India, New Delhi Regional Office:

  • 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.

 

In case applicant does not satisfy above criteria and are subsidiaries of other companies can submit Letter of Comfort from their parent company, subject to the condition that the parent company satisfies the eligibility criteria as prescribed.

 

After proper scrutiny, AD bank shall forward the application together with their comments/ recommendations to the Reserve Bank. Once approved by RBI the Branch office shall be allotted a Unique Identification Number (UIN). They are further required to obtain Permanent Account Number (PAN) from the Income Tax Authorities on setting up the offices in India.


 

Reporting Compliances

  • All new entities setting up Branch Office shall submit a report containing information, as per format provided within 5 working days of the branch office becoming functional to the Director General of Police (DGP) of the state concerned in which branch office has established its office; if there is more than one office of such a foreign entity, in such cases to each of the DGP concerned of the state where it has established office in India
  • Branch Offices have to file Annual Activity Certificates (AAC) 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 branch office are finalized with reference to a date other than March 31, the AAC along with the audited Balance Sheet may be submitted within 6 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.

Permitted Activities for Branch Office:

 

Branch Offices are permitted to represent the parent/group companies and undertake the following activities in India:

  • Export/Import of goods.
  • Rendering professional or consultancy services.
  • Carrying out research work, In areas 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 India and acting as buying/selling agent in India.
  • Rendering services in information technology and development of software in India.
  • Rendering technical support to the products supplied by parent/group companies.
  • Foreign airline/shipping company.

Normally, The Branch Office should be engaged in the activity in which the parent company is engaged. Profits earned by the Branch Offices are freely remittable from India, Subject to payment of applicable taxes.

 

Contact PKP for more details / documents required for setting up of Brach office in India.

 

Contact PKP

Opening of Branch Office in India by Foreign Entity

Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up Branch Office in India. A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer.
 

 

A body corporate incorporated outside India (including a firm or other association of individuals), desirous of opening a Branch Office (BO) in India have to obtain permission from the Reserve Bank under provisions of FEMA 1999 through AD Bank. The applications from such entities in Form FNC will be considered by Reserve Bank under two routes:

 

Bank under two routes:

 

• Reserve Bank Route - Where principal business of the foreign entity falls under sectors where 100 per cent Foreign Direct Investment (FDI) is permissible under the automatic route.

 

• Government Route - Where principal business of the foreign entity falls under the sectors where 100 per cent FDI is not permissible under the automatic route. Applications from entities falling under this category are considered by the Reserve Bank of India (RBI) in consultation with the Ministry of Finance, Government of India.

 

The RBI has prescribed  following criteria for sanctioning Branch Offices of foreign entities :

  • It must have profit making track record during the immediately preceding 5 financial years in the home country.
  • Total net worth of the applicant foreign entity should not less than USD 100,000 or equivalent i.e. Paid-Up Capital + Free Reserves - Intangible Assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name.

The application along with the prescribed documents including shall be forwarded through AD bank to General Manager, Foreign Exchange Department, Central Office Cell, Reserve Bank of India, New Delhi Regional Office:

  • 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.

 

In case applicant does not satisfy above criteria and are subsidiaries of other companies can submit Letter of Comfort from their parent company, subject to the condition that the parent company satisfies the eligibility criteria as prescribed.

 

After proper scrutiny, AD bank shall forward the application together with their comments/ recommendations to the Reserve Bank. Once approved by RBI the Branch office shall be allotted a Unique Identification Number (UIN). They are further required to obtain Permanent Account Number (PAN) from the Income Tax Authorities on setting up the offices in India.


 

Reporting Compliances

  • All new entities setting up Branch Office shall submit a report containing information, as per format provided within 5 working days of the branch office becoming functional to the Director General of Police (DGP) of the state concerned in which branch office has established its office; if there is more than one office of such a foreign entity, in such cases to each of the DGP concerned of the state where it has established office in India
  • Branch Offices have to file Annual Activity Certificates (AAC) 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 branch office are finalized with reference to a date other than March 31, the AAC along with the audited Balance Sheet may be submitted within 6 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.

Permitted Activities for Branch Office:

 

Branch Offices are permitted to represent the parent/group companies and undertake the following activities in India:

  • Export/Import of goods.
  • Rendering professional or consultancy services.
  • Carrying out research work, In areas 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 India and acting as buying/selling agent in India.
  • Rendering services in information technology and development of software in India.
  • Rendering technical support to the products supplied by parent/group companies.
  • Foreign airline/shipping company.

Normally, The Branch Office should be engaged in the activity in which the parent company is engaged. Profits earned by the Branch Offices are freely remittable from India, Subject to payment of applicable taxes.

 

Contact PKP for more details / documents required for setting up of Brach office in India.

 

Contact PKP Branch Office in India

Contact Person : Mr. Prakash k Gupta

Email -  pgupta@pkpconsult.com, pkpconsult1977@gmail.com

Telephone Numbers : +91-11-23382207/ 23388753

Mobile Number : +91-9811031841