The provisions regarding setting up Branch Office in India are governed by Foreign Exchange Management (Establishment in India of branch or office or other place of business) Regulations, 2000. Foreign companies are allowed to setup branch office in India after obtaining the requisite approval from the Reserve Bank of India (RBI). Permission to set up such offices is initially granted for a period of 3 years and this may be extended from time to time by the Authorized Dealer in whose jurisdiction the office is set up.
The general permission of RBI permits a Branch Office to conduct the following activities.
- Export/Import of goods
- Rendering professional or consultancy services.
- Carrying out research work, in which the parent company is engaged
- Promoting technical or financial collaborations between Indian companies and parent or overseas
- group company
- Representing the parent company in India and acting as buying/selling agent in India
- Rendering services in Information Technology and development of software in India.
- Rendering technical support to the products supplied by parent/group companies.
- Foreign Airline/shipping Company
RBI has given general permission to foreign companies, subject to certain conditions, for establishing branch/unit in Special Economic Zones (SEZs) to undertake manufacturing and service activities.
The branch office cannot expand its activities or undertake any new trading, commercial or industrial activity other than those which are expressly approved by the RBI.
Foreign companies engaged in manufacturing and trading activities abroad are allowed to set up branch offices in India. Although such branch offices can undertake trading activities, they are prohibited to carry out manufacturing activities directly. However, they are allowed to sub-contract these to Indian manufacturers.
Retail trading activities of any nature is not allowed for a Branch Office in India. Branch offices are permitted to acquire property for their own use and to carry out permitted/incidental activities but not for leasing or renting out the property.
Branch offices are extensions of the foreign company and do not constitute a body corporate of its own. The foreign parent company is liable for the acts of the branch office.
It is allowed to generate incomes in India and can meet its expenses from parent company's remittance from abroad or from its local income. It is not allowed to accept deposits. The commission earned by the branch office from parties abroad for any agency business shall be repatriated to India through normal banking channels. For the purpose of taxation it is deemed a resident of India. Profits earned by the Branch Offices are freely remittable from India, subject to payment of applicable taxes.
1. RBI- SUBMISSION OF APPLICATION
A foreign company desiring to establish a BO in India shall apply to the Reserve Bank of India in Form FNC through Authorised Dealer along with all necessary documents.
Necessary Documents are:
- Form FNC
- Annual return for 3 years
- Company Profile
- Board Resolution
Within 6- 8 weeks of filing the application, RBI will issue an approval letter.
3. OBTAINING DSC
The Information Technology Act, 2000 provides for use of Digital Signatures on the documents submitted in electronic form in order to ensure the security and authenticity of the documents filed electronically. All filings under MCA21 e-Governance programme are required to be filed with the use of Digital Signatures by the person authorised to sign the documents.(You can use only the valid Digital Signatures issued to you. However it is not lawful to use digital signature of some one else by way of impersonation.)
4. ROC - REGISTRATION PROCESS
A foreign company, having obtained RBI permission to setup a BO in India, shall intimate to the ROC in Form 44 along with necessary documents within 30 days from the date of approval of RBI. Necessary document for this purpose are:
- Form 44
- Certificate of Incorporation (Parent Company)
- Approval Letter from RBI
- Board Resolution and Power of Attorney
- Office Lease Agreement
- List of Directors (Parent Companay)