REQUIRED CONDITIONS OF A FOREIGN COMPANY OPEN A BRANCH OFFICE IN INDIA,

• The name of the Indian Branch office shall be the same as the parent company.
• The Branch office does not have any ownership, it is just an extension of the exiting company in a foreign country.
• All the expenses of the BRANCH office are met by the head office if it does not have the revenue from Indian
• The foreign parent company looking to start a Branch office in India shall have a profitable track record during immediately preceding five years in the home country.
• The Net Worth i.e. total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name shall be not less than or equal to USD 100,000.
• A branch office is suitable for foreign companies looking to set up a temporary office in India and not interested or not planning to have long term plans for the Indian operations; except banking, shipping and airlines, etc. mentioned above.

A Forign Company open A Branch Office in India

:

• Approval from RBI– Permission for setting up branch offices is granted by the Foreign Exchange Department,
• Reserve Bank of India, Central Office, Mumbai (note – Not by the RBI offices in respective state capitals)
• Track Record of the company -Reserve Bank of India considers the track record of the applicant company, the activity of the company proposing to set up an office in India as well as the financial position of the company while scrutinizing the application. (note – for setting up a company, there are no criteria for checking the track record or the financial position of the parent company)
• The applications from such entities in Form FNC (Annex-1) will be considered by Reserve Bank under two routes: The application in the prescribed form (Form FNC)should be submitted to the RBI through the Authorized Dealer bank.
• Reserve Bank Route— where principal business of the foreign entity falls under sectors where 100 percent
• Foreign Direct Investment (FDI) is permissible under the automatic route.
• Government Route— where principal business of the foreign entity falls under the sectors where 100 percent
• FDI is not permissible under the automatic route. Applications from entities falling under this category and those from Non – Government Organizations / Non – Profit Organizations / Government Bodies / Departments are considered by the Reserve Bank in consultation with the Ministry of Finance, Government of India.

Procedure for Approval from RBI:

1. Currently, as per the RBI Requirement, the application for the branch office and BRANCH office is
2. submitted through the Authorized dealer. The authorized dealer means the various institution having
3. banking licenses.
4. The application in the prescribed form (Form FNC) should be submitted to the RBI.

Expenses Reimbursement by foreign head office to the Indian liaison office cannot be treated as a supply (GST)

The Honourable AAR, Haryana, in the case of M/S. Wilhelm Fricke SE stated that the head office of Germany and the Indian Liaison Office cannot be treated as separate persons, since no consideration for any services is charged to the Liaison Office. There can therefore be no flow of services between them, as one cannot provide self-service, & therefore the reimbursement of costs incurred by the head office cannot be allowed to treat as consideration for any service under the GST Law. [Advance Rule No. HAR/HAAR/R/2019-20/24, adopted on 25 June 2020]

Annual Compliances for Branch office of a Foreign Company

ANNUAL REPORTING OF BRANCH OFFICE

 

• On or before September 30th of that year, file an Annual Activity Certificate (AACs) with RBI from the auditors as of March 31, together with the audited Balance Sheet, stating that the Branch Office has engaged in only those activities approved by the Reserve Bank of India.
• The project office may submit to the designated Authorized Dealer Category-I bank an AAC from a Chartered Accountant showing the project status and certifying that the project office’s accounts have been audited and the activities undertaken are in compliance with the Reserve Bank’s general/specific permission.
• Filling of accounts along with the list of all principal places of business in India established by foreign company- In form FC-3
  • Statement of transfer of funds
  • Approval letter obtained for every establishment in India by a foreign company
  • balance sheet and profit and loss account duly authenticated under section 381(1) (Mandatory).
  • Statement of related party transactions
  • latest consolidated financial statement of parent company (Mandatory).
  • Statement of repatriation of profits
  • In case the document is in any other language other than English, certified translation in English language is mandatory.
• File annual return with Registrar of Companies (ROC) – In form FC-4-Normal
  • Details of the meeting of the members or class thereof, board and its various committees along with attendance details. (Mandatory)
  • Particulars of Holding, subsidiary and associate companies and firms. (Mandatory in case number of entities prescribed at serial no 6 is more than seven)
  • Particulars of members and debenture holders along with changes therein since the close of previous financial year. (Mandatory)
  • Details of Promoters, Directors and Key managerial personnel and changes therein since close of previous financial year. (Mandatory)
  • Details of directors and key managerial personnel and their remuneration. (Mandatory)
  • Details of Penalties / punishment/ Compounding of offences, if any. (optional)

Name	Parentage	Nationality	Age	E-mail and Mobile No.	Passport & Visa Particulars	Designation/Profession	Date of Entry in India

• Getting Annual Accounts audited.
• Maintenance of Books of Account
• File return and pay applicable taxes along with AAC with Income Tax department.
• A copy of the report as per the prescribed format to DGP of concerned state.

Annual Compliance under FEMA – Foreign Liabilities and Assets return (FLA) –

Foreign Branch or Liaison office  is required to file FLA return if any foreign assets or foreign liabilities are outstanding as on reporting date. Annual return on Foreign Liabilities and Assets has been notified under FEMA 1999 and it is required to be submitted by all the India resident companies which have received FDI and/ or made overseas investment in any of the previous year(s), including current year by July 15 every year. Non-filing of the return before due date will be treated as a violation of FEMA and penalty clause may be invoked for violation of FEMA.

List of Documents required for Compliances for Branch office of a Foreign Company

• Name of Foreign Entity alongwith E-mail ID, date and place of Incorporation
• List of Personnel Employed including Foreigner in the following Format in DGP Report:

Name	Parentage	Nationality	Age	E-mail and Mobile No.	Passport & Visa Particulars	Designation/Profession	Date of Entry in India

• Contact Details of BO/LO.
• Details of Contracts worked upon/initiated during the year in DGP Report
• Audited Financial Statements alongwith Receipts and payments account
• PAN Card copy of Branch Office
• Approval Letter from RBI with UIN
• Details of Head of Office along with Passport Particulars in DGP Report

Note: Documents stated above from Point 1 to 3 are only for Annual Activity Certificate and rest points needed for DGP Report.

Summary of Compliances for Branch office of a Foreign Company

Authority	Reporting Requirement	Frequency	Due Date
RBI	Annual Activity Certificate as at 31st March each year alongwith Audited FS including Receipt &  Payments A/c Via its Authorized Dealer Bank duly signed by the Auditor	Annually	Sept 30
Directorate General of Income Tax (International Taxation), New Delhi	Annual Activity Certificate as at 31st March each year along with Audited FS including Receipt &  Payments Accounts	Annually	Sept 30
Director General of Police	A copy of the report as per the prescribed format to DGP of concerned state along with Annual Activity Certificate and Audited Financials	Annually	Sept 30
Registrar of Companies	Form FC‐1 for intimation of approval from RBI Filing form FC‐ 1	One Time	Within 30 days of receipt of approval from the RBI of registration in India
	Form FC‐2 for intimating any changes in the Branch office (constitution, name, directors change etc.) Filing form FC‐	Event based	Within thirty days from the date on which the alteration was made or occurred.
	Form FC-3 for filing of accounts along with the list of all principal places of business in India established by foreign company	Annually	Dec 31
	Form FC‐4 for filing of Annual return	Annually	May 30

• Know more about the relevant blogs:
• Procedures for the conversion of partnership firm into Private limited company