Monday, January 24, 2011



Any foreign company wants to set up a Liaison office in India should get prior approval from RBI by submitting a form namely Form FNC.
Approval for such branch office / Liaison office is being given under two routes.

Reserve Bank Route:

Where 100% FDI is allowed under automatic route. Application has to be made to RBI. Reserve Bank will look into the following additional criteria for according its approval for Branch/ Liaison office in India by foreign entities.
·         For Branch Office – The foreign entity should have a profit track record of immediately preceding five years in its home nation with a net worth of minimum of $100,000 or its equivalent.
·         For Liaison office - The foreign entity should have a profit track record of immediately preceding three years in its home nation and with a minimum net-worth of $50000 or equivalent.
Government of India Route:

The foreign companies that not fall under 100% FDI under automatic route. Application may be from foreign non-profit organisations, non-government organisations, foreign government departments, foreign government bodies.
The Application for BO / LO should be forwarded in Form FNC through a designated AD Category -1 BANK  along with the following and should be addressed to
                         The Chief General Manager –in-Charge,
                          Reserve Bank of India m
                         Foreign Exchange Department,
                         Foreign Investment Division,
                         Central Office, Fort, Mumbai -400 001

Along with the following documents:

  • ·         Certificate of Registration or Incorporation or Memorandum & Articles of Association duly attested by Notary Public / Indian Embassy in the country of incorporation
  • ·         Latest Audited Balance Sheet of the Applicant Company or entity.
  • If any applicant do not fulfill the above mentioned eligibility criteria and if they are subsidiaries of other companies, they can submit a Letter of Comfort from their parent company provided that the parent company fulfills the eligibility yardstick as mentioned above.
It should be noted that an applicant cannot directly submit his application to RBI and he should forward the same through his banker a AD-Category -1 bank
Once the application is approved by RBI , it will allocate a Unique Identification Number (UIN) to the applicant. PAN number should also be obtained by such LO/BO from Income-Tax authorities in India.

Liaison Office

A liaison office or a representative office is on which can undertake only liaison activities so that it can act as a channel of communication between representatives in India and Head Office in abroad. A Liaison office is not authorised to do any business activity in India and hence cannot earn any income in India.  To meet any expenses in India, funds should be remitted through normal banking channels as inward remittance.  The permission for liaison office is initially granted for three years and renewal of approval can be made from time to time by an AD Category I bank for another 3 years provided the following documents are submitted.
·         The LO should have submitted the Annual Activity Certificates for the previous three years.
·         The banking account of LO with AD Category -1 bank has been operated in tune with the conditions and terms as mentioned in the approval letter.
In normal scenarios, extension of LO is being granted within one month of receipt of application.

Branch Offices

   Foreign companies who engaged in manufacturing or trading activities can set up a branch office in India with specific approval from the Reserve Bank of India.  Such branch offices are allowed to represent the parent or group companies and to undertake the following activities in India.
  • ·         Export / import of goods
  • ·         Rendering any consultancy or professional service
  • ·         Rendering services in information technology and development of software in India.
  • ·         Carrying out any research work, in areas in which the parent company is engaged.
  • ·         Representing parenting company in India and acting as selling or buying agent in India.
  • ·         Promoting financial or technical collaborations between Indian companies and overseas group company or parent company.
  • ·         Rendering technical support to the products supplied by group or parent companies.
  • ·         Foreign airline or shipping company
Restricted Activities:

·         Branch office is not allowed to engage in retail trading activities in India .
·         No manufacturing or processing activities is permitted to carry out by a branch office in India.
·         Profits earned by the Branch office are freely remittable from India subject to payment of applicable taxes.
Annual Activity Certificate should be submitted by the Branch / Liaison Office duly certified by a Chartered Accountant either at the end of 31st March or before 30th April of every year to the designated AD Category I bank with a copy to the Directorate General of Income Tax (International Taxation), New Delhi.

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