Tuesday, January 25, 2011
Procedure for Establishment of Project Office in India
Establishment of Project Office in India
Reserve Bank of India has given special permission to foreign companies to open project offices in India provided they have secured a contract from an Indian Company to execute a project in India and
· The project is directly funded by way of inward remittance from abroad;
· The project is funded by a multilateral or bilateral International Financing Agency ;
· The Project has been cleared by an appropriate authority
· A company or entity in India awarding the contract has been sanctioned by a Public Financial Institution or a bank in India for the project.
In case, if the above criterion have not been met, then such foreign entity has to approach the Reserve Bank of India, Central Office, for approval.
Obligations on the part of Designated AD Category -1 Bank
AD Category -1 banks can open non-interest bearing Foreign Currency Account for Project Offices in India subject to the following:
· The Project office has been established in India, with a specific/general permission of Reserve Bank of India , having the requisite approval from the concerned Project Sanctioning Authority .
· The contract, under which the project has been sanctioned, specially provides for payment in foreign currency.
· Two foreign currency accounts can be opened by each project office, usually one in home currency and the other in the USD, provided both are maintained with the same AD category -1 bank.
· Only project related expenses will be allowed as a permissible deduction.
· It is the AD who has been given power to decide whether an expense is a project related one or not. Further, the concurrent auditor of AD banker will have to scrutinize the nature debits and credits on continuous basis.
· The foreign currency account of such project office has to be closed on the closure of such project office.
If the foreign contractor is having many project offices for different projects in India , for inter-project transfer of funds , prior approval from the regional offices concerned under whose jurisdiction the project office is situated is needed.