The name of the Liaison Office should be given after the name of the parent company
In India, Liason Offices play an instrumental role in finding out possible market opportunities, source of supply while offering details regarding the parent company to the Indian authority and customer base.
A Liaison office operates as a representative office. Setting up a liaison office in India is the initial stage of exploring and understanding the business and investment type of the country. A Liaison Office can take part in liaison activities like building communication between parties in India and the Head Office in foreign countries.
So the role of such office is limited to acquiring enough information on possible market opportunities in India, providing adequate details of the parent company and its products, rendering enough particulars on the source of supply to the Indian consumers, or vice versa to its vendor.
What are the procedures to set up a Liaison Office in India?
For all the Foreign companies who are willing to establish a Liaison Office in India, they need to obtain prior approval from the Reserve Bank of India. This whole process may take up to 3 to 4 weeks for processing the application. The life span of this approval will be 3 years, and it can be renewed on expiry. If a body corporate, which is incorporated outside India, wants to open a Liaison Office, it must obtain such permission through an application in Form FNC. This application needs to be supported by-
- Certificate of Registration/ Incorporation, or AOA & MOA attested by Indian Notary Public/ Indian Embassy in the country of registration
The latest audited balance sheet of the applicant
What activities can a Liaison Office undertake?
- Representing the parent companies in India
- Promoting the technical or financial collaborations between the parent company and companies in India
- Promoting export or import services from or to India
- Acting as the only bridge of communication between the parent company and Indian companies
RBI imposed Eligibility Criteria to sanction a Liaison Office in India
Reserve bank of India has imposed certain criteria to set up a Liaison Office in India. These are-
- The parent company must hold a track record of profit-making during the preceding 3 taxation years.
- The total net worth of the foreign applicant company has to be equivalent to USD 50,000 or more than that, including Paid-up capital and free reserves.
- Every Liaison Office, which is registered with RBI, has to be registered under the Ministry of Corporate Affairs as a corporate entity. The registration of the Liaison Office is meant to establish a foreign company in India. The registrar will assign a Corporate Identity Number (CIN) to these companies.Note: In case, the foreign applicant company fails to satisfy the above-mentioned criteria and is a subsidiary of another company, it can submit a Letter of Comfort from the parent company, given that the parent company meets the eligibility criteria as set by RBI. After a proper checking, AD bank must forward the application to the Reserve Bank along with their comments. Once the application gets approval from RBI, the applicant will be allotted a UIN (Unique Identification Number). After that, they shall obtain PAN (Permanent Account Number) from the Income Tax Authorities for setting up the Liaison Office in India.
Restrictions on operation of the Liaison Office
- Liaison Office is not allowed to undertake any kind of direct or indirect trading, commercial, or industrial activity; so they can’t earn any money in India
- A Liaison Office can’t borrow or lend money in India
- It cannot hold, acquire, dispose or transfer any immovable property of India without any prior approval of RBI
How can VJM & Associates LLP help you in setting up a Liaison Office in India?
We can assist you through the process of establishing a Liaison Office in India. We can help you in-
- Obtaining approval from the Reserve Bank of India
- Acquiring CIN for your Liaison Office
- Getting your Liaison Office registered with the Registrar of Companies
- Maintaining the Financial books of Accounts of your Liaison Office
- Doing Annual Audit of Books of accounts
- Payroll processing
- Reporting of the Liaison Office on an annual basis with the concerned authorities
- Getting the Statutory Compliances done within the stipulated time
CONDITIONS FOR LIAISON OFFICE IN INDIA |
ACTIVITIES LIAISON OFFICE CAN DO |
| A Liaison office is not allowed to execute any commercial operations in India | Can act as a representative of the Parent Company or Group of Companies |
| A Liaison office is not allowed to borrow or lend money | Promote export or import business in India |
| All expenses of a Liaison office has to be meet via inward remittances from the parent company through the associated bank | Can develop financial or technical collaborations between the Parent company and Indian companies |
| Liaison Offices are not subject to taxation in India | Act as a communication channel |
The enterprise was founded by Chartered Accountant Mr. Jothilingam S.
