But one needs approval from the RBI and proceed through the provisions described under Foreign Exchange Management Act (FEMA), 1999 to start a branch office in India.
A foreign company can smoothly operate in India by opening a Branch Office. The parent company must obtain approval from the Reserve Bank of India, and get the registration done with ROC prior to branch office setup. This type of branch office gets treated like a foreign entity and is liable to pay higher Income Tax up to 40%.
Before we proceed, you must know that you have to be eligible first to get your branch office registered in India. The application form for the same needs to be filed with the AD Category 1 Bank, given that If the foreign company is a subsidiary and ineligible, then the parent company must have issued a Letter of Comfort (LOC).
Conditions For Branch Office In India |
Activities Branch Office Can Do |
| The branch office has to have the same name as the parent company abroad. | Can offer professional or consultancy service Can export or import goods from or to India |
| The parent company looking to set up its branch office in India should have a profitable financial track record for the last 5 years. | Allowed to carry research work in the sectors where the parent company is engaged |
| The foreign parent company needs to fulfill the financial obligations of the branch office if it doesn’t generate any revenue from its business operations in the country. | A branch office can represent the parent company in India and act as a buying or selling agent for the company |
| As per the latest audited balance sheet of the parent company, the company needs to have a total paid-up capital or net worth value of USD 100,000 or more. | Branch offices can offer services in IT and Software development operations in India |
| Can offer technical assistance for the parent company product |
Requirements for setting up a Branch Office
Any foreign company who meets the eligibility criteria can set up a Branch Office in India. But along with that, companies need to satisfy the following conditions –
- The name of the Branch Office has to be the same as the parent company.
- The applicant entity needs to have a profitable and steady financial track record for the past 5 years.
- If the branch office does not generate any revenue, then all of their financial obligations need to be fulfilled by the parent company abroad.
- The total paid-up capital or the net worth according to the latest Audited Balance Sheet, or statement of Account certified by a Registered Accountant must not be less than or equal to USD 100,000.
Permitted Operations of Branch Offices
Foreign businesses starting their branch offices in India are allowed to operate in the following sector,
- Offering consultancy services or professional services
- Indulge in export or import goods
- Proceed with research work in the field the parent company is engaged
- Acting as a selling or buying agent for the parent company while representing the company in India
- Promotion of financial and technical collaborations with the Indian companies
- Offering services in the field of IT and Software development
- Offering technical support for the parent company product
- Running foreign airline or shipping company
However, as per government regulations, a branch office can’t indulge in manufacturing activities, but they can subcontract their manufacturing needs to an Indian company.
Required documents to form a Branch Office in India
According to the RBI rules, the application for opening a Branch Office in India should be submitted only by an Authorized dealer. An authorized dealer means an institution which has banking licenses. However, have a look at the documents, which are required to open a Branch Office in India.
- Three copies of Form FNC 1
- The letter of authority, issued by a parent company to favour the Local Representative
- A comfort letter from the parent company which is provided in support of the operation in India
- Letter of authority or Resolution from the parent company for building a Branch Office in India
- The letter, issued by the principal officer of the foreign parent company to RBI
- Two copies of the Certificate of Incorporation in English, Memorandum & Articles of association of the parent company, which is attested by the Indian notary public or Indian embassy in the country of registration
- Latest audited balance sheet along with annual accounts of the parent company, which is translated notarized for the past 3 years and adequately authenticated
- Certification of Incorporation- Duly Notarized, Translated and properly authenticated
- Name, email id, address and phone number of the authorized person in the home country
- Organization’s commitment to the effect that it will be open to opinion sought or reported from the banker by the Reserve Bank of India or Government of India
- Details of the Bankers of the Organization including country of origin and bank account number
- The expected funding amount for operating in India
- Details of the activity done by the parent company, in the foreign country including a brief on the product and services of the company
- Address of the proposed Branch Office, how many persons are going to be employed, how many foreigners will be there, and address of the head office of the same Branch Office, located outside India
- Bankers certificate
- Latest identity and address proof of all the Directors, which are properly certified and authenticated by the banker in Home Country
- Resolution for initiating a bank account with the banker
- Structure of the company and its shareholding pattern
- Details of the company of an individual who is holding more than 10% share
- Complete KYC of the shareholder who has 10% stakes on the applicant company
- A signed copy of the bank account opening proof in Indian Bank
RBI approves the license, which is required to open a Branch Office in India. But, according to the latest changes, this application process is not routed through the Authorized Dealers (AD).
How Can VJM & Associates LLP Help?
Having professional experience for long VJM & Associates LLP can help foreign companies to meet all the registration and compliance needs to set up branch offices in India. If you are looking to set up a branch office in India here is how VJM & Associates LLP can help you,
- Complete assistance with documentation
- Filing the Form FNC to RBI via registered AD Bank
- Digital Signature for the Authorized Signatory
- Getting PAN & TAN for the company
- Support for opening the bank account
- Assistance with GST registration
- Complete support with RoC registration
- Assistance in getting Import Export Code (IEC)
- Help with Government fee and taxation
The enterprise was founded by Chartered Accountant Mr. Jothilingam S.
