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Since liberalization in India, foreign investors have arrived gradually into the Market. Now, to improve the ease of doing business, the government has issued guidelines to approve the establishment of Branch Office (BO)/Liaison Office (LO)/Project Offices (PO) in India by foreign entities.
Table of Contents
Branch office means any entity established by a foreign Company in India. Which is described as such by the Company.
Liaison Office means a place of business which will act as a channel of communication between the principal place of business or Head Office and entities in India. In liaison office, no permission is granted to undertake any commercial /trading/ industrial activity, directly or indirectly and shall maintain all inward remittances received from abroad through normal banking channel.
Project Office means a place of business in India to represent the interests of the foreign company executing a project in India but it excludes a Liaison Office.
Site Office means a sub-office of the Project Office established at the site of a project but which also not include a Liaison Office.
The following points must be noted with respect to opening a Branch office or a Liaison office or a Project office or any other Place of Business in India.
A person resident outside India shall fulfill the following criteria to establish a branch office or a liaison office in India:
For Branch Office: shall be a profit making track record during the immediately preceding five financial years in the home country and shall have at least minimum net worth of USD 100,000 or its equivalent.
For Liaison Office: shall be a profit making track record during the immediately preceding three financial years in the home country and shall have at least minimum net worth of USD 50,000 or its equivalent.
Application by financially unsound subsidiaries of other companies: In such case, an applicant shall submit a letter of Comfort from their parent company. A parent Company shall satisfy the prescribed criterion as mentioned above for net worth and profit.
A person resident outside India who desire to establish branch/liaison offices in India can undertake or carry on any activities permitted by Reserve Bank of India. They cannot undertake any activity not permitted.
Permitted activities for a branch office in India of a person resident outside India:
Permitted activities for a liaison office in India of a person resident outside India:
LO can open a bank account with the designated AD category I Bank in India for receiving remittances from its Head Office outside India.
BO may open a bank account with any AD Category-I Bank in India for its business operations in India.
The entity from Pakistan shall require taking prior approval of Reserve Bank of India to open a bank account for its PO in India.
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