In today’s global economic era every corporate irrespective of its home country wants to expand its business outside the boundary of its home country, Corporates having this kind of expansion vision always seeks opportunities in other countries to expand their business but in many situations due lack of research and development and knowledge about foreign market and customer needs knowledge in other countries the corporates don’t get succeed to achieve its vision.
India is now a growing economy and the worldwide corporates in the world are looking to enter in Indian markets, considering this fact Indian law has introduced the concept of Liaison Office & Branch Office.
Liaison office & project offices are the representative of foreign companies in India which are established to get the required information, research and development about Indian market opportunities and for the marketing of foreign companies product and services in the Indian Market. Further, this is the mere source of communication between the head office and the potential Indian customers and investors.
Setting up a liaison office or opening a branch office in India requires some government approval procedures and the annual compliances.
Opening branch office or liaison offices in India is not so difficult in consultation with the professionals associated with this kind of work like top accounting firms in India, The procedure and compliances related to opening of branch office or liaison office and its annual compliances along with its tenure and the compliances on its closure is discussed below.
Liaison Office Opening Procedure
Obtain RBI Approval: In order to set up liaison office or branch office in India you are required to obtain Reserve Bank of Indian’s permission, For obtaining this approval you need to choose a bank where the account of your LO/BO will be opened, this bank will work as an authorized dealer between you and RBI.
Now you have to file an application along with some required documents to RBI through your AD bank, if RBI is satisfied with the condition and object of your LO/BO then it will issue an Approval Letter as being a permission to operate in India as a Liaison Office or Branch Office.
Obtain Registrar of Companies(ROC) Approval: After obtaining RBI’s approval you are further required to get approval from ROC in form of Certificate of Establishment in India, The E-Form available for making the application is named as Form FC-1. Further you need to attach required documents while submitting the application.
Apply for PAN and TAN from Income Tax Department: After the permission or approvals, you are now required to apply for Permanent Account Number (PAN) and Tax Deduction and Collector Account Number (TAN) from the income tax authorities.
Reporting of Registered Office to RBI: Within 6 months of its establishments LO/BO are required to report RBI about its registered office along with the copy of Certificate issued by ROC of establishment and it’s PAN/TAN obtained from Income Tax Authorities.
Annual Activity Certificate: LO/BO are required to obtain from a certified practicing chartered accountant an ‘Annual Activity Certificate’ and to report the same to:
- Reserve Bank of India through its AD bank
- Income Tax Authorities
Further, the annual activity certificate shall be annexed with its financial statements and the financial statements of its parent company.
Filing with ROC: LO/BO are further required to report its financial statements and other reports to ROC in E-Form FC-3
Renewal and Closure of Liaison or Branch Office
Renewal & Closure: Initial approval for Branch office and Liaison Office is granted by RBI only for 3 years from the date of approval. If the LO/BO wants to extend such period they can apply with RBI through AD bank for the extension of such approval for maximum of 3 more years within 1 or 2 months before expiration of previous approval, But in case of closure all the operation of such liaison office should be properly closed and the claims should be properly settled down.