Any Person resident outside India want to do the business from India through open a branch office in India subject to the some legal formalities with AD Bank. No person resident outside India shall without prior approval of the RBI open a branch office by whatever name called except as some Direct Establishment allowed which are laid down in the RBI Regulations.

Understand step by step process for setting up the branch office in India:

Step-1: Check Eligibility before Situation of Place of Business in India

• The non-resident entity looking for establishing a Branch office in India must having a financially sound;
• The Investor company must be a body corporate incorporated outside India;
• The name or brand of the Indian branch office must be in accordance with the parent company Name (Note: In case branch office does not generating revenue from Indian operations, then in that case all expenses must be met by its Parent Company or head office situated outside India);
• Must check that Principal business falls under sectors where 100% FDI is allowed;
• The net-worth of the branch office must not be less than US $1 lac; and
• The parent company should have a profit making record in the immediately preceding 5 financial years in the home country.

Step-2: Application to AD Bank

• Application need to furnish with AD Category-I bank('Authorised Dealer' means a person authorised as an authorised dealer under sub-section (1) of section 10 of the Act) in Form FNC under the guidelines by RBI;
• Principal business falls under sectors where 100 % FDI is allowed in terms of FEMA Notification No. 20/2000-RB dated May 3, 2000;
• RBI considers the track record of the Applicant Company at all times.

Step-3: Banking Approval & Extension if any

• AD Bank subject to the provisions of Regulation 5, grant approval as per the directions and/or guidelines issued by the Reserve Bank time to time;
• In case no office is opened by the person resident outside India within 6 months from the date of approval letter, the approval for establishing the office in India shall be cancelled;
• In cases when person resident outside India is not able to open the office within the given time frame due to any reasons beyond their control, the Authorised Dealer Category-I bank might consider for granting extension of time for setting up the office by a further period of 6 months;
• Any further extension of timeline shall require the prior approval of the RBI.

Step-4: Issue of UIN & Approval letter

• Allotment of Unique Identification Number (UIN) shall be granted by Reserve Bank, the AD Category-I bank after Approval;
• After receipt of the UIN from the Reserve Bank, the AD Category-I bank shall issue the approval letter to the non-resident entity for establishing branch office in India.

Step-5: Apply for PAN for Branch Office

• Branch Office shall apply for PAN Card from the Income tax Authority of India to operate in India.

Yes, some are the Exemption given under RBI Guidelines Notification No. FEMA 22(R)/ 2016-RB:

• A banking company resident outside India shall not require any approval under these Regulations for establishing any office in India if such company has obtained necessary approval under the provisions of the Banking Regulation Act, 1949.
• An insurance company resident outside India shall not require any approval under these Regulations for establishing any office in India if such company has obtained approval from the IRDA established under section 3 of the Insurance Regulatory and Development Authority Act, 1999.
• A company resident outside India shall not require any approval under these Regulations to establish a branch office in the Special Economic Zones (SEZs) to undertake manufacturing and service activities, subject to the conditions that:

1. such branch offices are functioning in those sectors where 100% FDI is permitted;
2. such branch offices comply with Chapter XXII of the Companies Act, 2013; and
3. such branch offices function on a stand-alone basis.

Yes, Conditions for Branch Office are given under RBI Guideline:

A profit making track record during the immediately preceding 5 financial years in the home country and net-worth shall not be less than USD 1 lac or its equivalent. But, if a person resident outside India that is not financially sound and are subsidiaries of other companies may submit a Letter of Comfort from their parent company subject to the condition that parent company fulfilling the prescribed criterion of net worth and profit.

Letter of Comfort given under Annex A of RBI Guidelines from their parent company subject to the condition that the parent company satisfies the prescribed criterion for net worth and profit;

Format of the Letter of Comfort

[See Regulation 4 (a)]

The Authorised Signatory,

(Address of the Authorised Dealer Category-I bank)

Dear Sir, Sub: Application for establishment of branch / liaison office in India by our subsidiary / group company, M/s_________________________

You may kindly refer to the application made by our subsidiary / group company, M/s_____________________________to your office for establishing branch / liaison office in India.

2. In this connection, we, ______________________(the parent company/group company) undertake to provide the necessary financial support for our subsidiary / group company's operations as a branch / liaison office in India. Any liability that may arise due to the functioning of the branch/liaison office in India will be met by us (the parent company/group company), in case of inability on part of the branch/liaison office to do so.

3. We are also enclosing the financial background of our company in the form of our latest Audited Balance Sheet / Account Statement certified by a Certified Public Accountant.

Yours faithfully,

(                                  )

Authorised Representative of the parent company

As per company law, a resident having PAN to be authorised for receiving documents/notices/orders/etc. in India for on behalf of foreign Parent company.

Yes, you may refer to the official RBI Link here https://rbi.org.in/Scripts/NotificationUser.aspx?Id=10398&Mode=0

Branch office should be engaged in the activity in which the parent company is engaged for-

• Export/import of goods.
• Providing professional or consultancy services (other than practice of legal law profession in any manner).
• Research work in which the parent company is engaged.
• Facilitating technical or financial collaborations between Indian companies and parent or overseas companies.
• Representing parent company with same name or brand in India to acting as buying/ selling agent.
• Providing services related to Information Technology and development of software in India.
• Providing technical support to the products supplied by parent/group companies.
• Representing a foreign airline/shipping company.

No, The Hon’ble Supreme Court via its interim orders on July 4, 2012 and September 14, 2015 respectively, order passed in one of the most famous case Bar Council of India vs A.K. Balaji & Ors., in which directed to RBI that not to grant any permission to any foreign law firm or Companies for practice profession of law in India, on or after the date of the said interim order, for opening of any place of business in India.

The Hon’ble Supreme Court held that those advocates enrolled under the Advocates Act, 1961 alone are only entitled to practice law in India and that foreign law firms/companies or foreign lawyers cannot practice profession of law in India. As such, foreign law firms/companies or foreign lawyers or any other person resident outside India, are not allowed to establish any branch office or project office or liaison office or other place of business in India for the purpose of practicing legal profession under Indian law.

AD Category – I banks are directed that not to grant any approval to any branch office, project office, liaison office or other place of business in India as per FEMA law for the purpose of practicing legal profession in India.

Applicable laws are: -

• Companies Act, 2013;
• Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000; and
• Guidelines, Circulars and Notifications Issued by RBI.

Yes, after approval from AD Bank application within 6 months office shall be opened. In case, no office is opened by the person resident outside India within six months from the date of approval letter, the approval for establishing the office in India shall be cancelled by the AD Bank and need to apply for Extension.

Any person resident outside India may establish in India under these Regulations a liaison office for a period of three years subject to the provisions of Regulation 4 d (III). After receipt of an application, the AD Category-I bank concerned Might extend the validity period of approval for a period of 3 years from the date of expiry of the original approval / extension granted by AD Bank, subject to directions issued by the RBI in this regard if any.

A person resident outside India desiring to establish additional branch office or liaison office may submit to the AD Category-I bank a fresh FNC Form along with the justification for the need for additional office(s) place in India.

Yes, person resident outside India for opening of a branch Office in India shall require prior approval of RBI in following cases:-

• The applicant is a citizen of or is registered/incorporated in Pakistan;

• The applicant is a citizen of or is registered/incorporated in Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau and the application is for opening a BO/LO/PO in Jammu and Kashmir, North East region and Andaman and Nicobar Islands;

• The principal business of the applicant falls in the four sectors namely Defence, Telecom, Private Security and Information and Broadcasting. In the case of proposal for opening a PO relating to defence sector, no separate reference or approval of Government of India shall be required if the said non-resident applicant has been awarded a contract by/ entered into an agreement with Ministry of Defence or Service Headquarters or Defence Public Sector Undertakings. There shall be no requirement of any approval from RBI also only for such cases;

• The applicant is a Non-Government Organisation (NGO), a Non-Profit Organisation, or a Body/ Agency/ Department of a foreign government.

Such applications may be forwarded by the AD Category-I bank to the General Manager, Reserve Bank of India, Central Office Cell, Foreign Exchange Department, 6, Sansad Marg, New Delhi-110 001 who shall process the applications in consultation with the Government of India.

Yes, tax in Indian Economy is levied by either by the Central Government or the State Governments. But some minor taxes are also levied by the local authorities i.e. Municipality and Local Government of India. Taxes in India are primarily into 2 categories - Direct and Indirect Tax.

India’s taxation system provides some relief such as:

• A non-resident companies taxed only on income that is received in India, or that accrues or arises, or is deemed to accrue or arise, in India. Company whether Indian or foreign is liable to taxation, as per the Income Tax Act,1961.
• Corporation tax is a tax that is levied on the incomes of registered companies and corporations

No, branch office not allowed to carry out any manufacturing or processing activities directly/ indirectly. A Branch office is further not allowed to undertake any Retail Trading activities of any nature in India. Branch Offices have to submit Activity Certificate from a Chartered Accountant on an annual basis.

Closure of Branch Office (BO) and remittance of winding up is a lengthy task and therefore it is advised to seek support from Compliance Calendar who can make compliances easy.

Step-1: Application to AD Bank along with supporting documents

• Company need to approach the designated AD Category - I bank with an Application Requests for closure of the Branch office and for remittance of winding-up;
• Following documents need to be furnish along with an Application:

• Copy of the RBI Granted permission/ approval letter from the sectoral regulator(s) for establishing the Branch office;
• Latest Audited Balance Sheet of the Parent company along with Auditor’s certificate-

1. indicating the manner in which the remittable amount has been arrived at and supported by a statement of assets and liabilities of the applicant, and indicating the manner of disposal of assets;
2. confirming that all liabilities in India including arrears of gratuity and other benefits to employees, etc., of the Office have been either fully met or adequately provided for; and

• confirming that no income accruing from sources outside India (including proceeds of exports) has remained un-repatriated to India.

Step-2: Parent Company Confirmation

• Confirmation from the applicant or parent company that no legal proceedings in any Court in India are pending and there is no legal impediment to the remittance;

Step-3: MCA NOC

• A roc report need to be taken from the Registrar of Companies in which jurisdiction branch office situated in relation to compliance with the provisions of the Companies Act, 2013, in case of winding up of the Office in India;

Step-3: Other details and documents

• Any other document/s, specified by the RBI while granting approval. The designated AD Category - I banks has to ensure that the BO had filed their respective Annual Activity Certificates with the Reserve Bank for the previous years, in respect of the existing Branch;
• Confirmation about the same can be obtained from the Central Office of the Reserve Bank in the case of BO.

Step-4: Remittance of funds while winding up Procedure

• the designated AD Category - I bank may permit the remittance subject to the directions issued by the RBI in this regard from time to time and payment of applicable taxes in India, if any;

Step-5: Intimation to the RBI

• Closure of Branch Office shall be reported by the designated AD Category - I bank to the RBI (the Central Office for BOs);
• A declaration need to submit stating that all the necessary documents submitted by the Branch office have been scrutinized and found to be in order.
• If the documents are not found in order or cases are not covered under delegated powers, the AD Category - I bank may forward the application to the Reserve Bank, with their observations, for necessary action; and
• All the documents relating to the Branch Office operations may be retained by the AD Category - I bank for verification by the internal auditors of the AD / inspecting officers of the Reserve Bank.

Yes, A ROC report is required from the Registrar of Companies in which jurisdiction branch office situated in relation to compliance with the provisions of the Companies Act, 2013, in case of winding up of the Office in India;

MCA Form FC-2 need to be filed along with the attachments :-

• Certified true copy of the Board resolution for approval of closure of Branch Office
• Copy of the General Meeting Resolution for approval of closure of Branch Office
• Translated version of the documents in English (in case documents attached are not in English).
• Particulars of alterations in the place of business in India of the company (particulars of cessation/ closure of Branch Office in the said case).

Yes, if you change the office of Branch Office to another place within the city, you shall intimate the designated AD Category - I bank. In the event of shifting the office to any other city in India, prior approval of the AD Category-I bank is required to be obtained.