Differences between the Liaison Office and Branch Office of a Foreign Company/Corporation in India
Author: Juhi Pandey | in, Updated on: February 06, 2025 | Category:
Overview : Foreign corporations can commence their operation in India by setting up a place of business without creating a legal entity such as a branch, liaison, or project office, or can incorporate a separate legal entity such as a wholly owned subsidiary, Joint venture, Limited liability Partnership (LLP). The decision to select the entry option would depend on the objective, purpose, and suitability. This blog will highlight the key difference between branch and liaison offices.
Introduction
India is the place to manufacture and sell globally due to its political stability and rebound democracy. Its large consumer market, economic growth, strategic location, government focus on making in India, ease of doing business and lower tax rate, and growing digital infrastructure make India an attractive destination for foreign direct investment.
The Foreign company can set up business in India through two primary methods: by establishing separate legal entities such as wholly owned subsidiaries, joint ventures, or limited liability partnerships or by establishing a branch office, liaison office, or project office. The separate legal entities like the company and LLP are incorporated and governed under respective legislation such as the Companies Act 2013 or the LLP Act 2008 read with the FDI policy and Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. The Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulation, 2016 issued by the RBI under FEMA provides for the law the Master Circular on Establishment of Liaison /Branch/Project Offices in India by Foreign Entities provides for the procedure to establish a Branch, Liaison or Project office in India. The discussion in this blog will primarily focus on the key differences between a liaison office and a branch office.
What is the Liaison Office?
A Liaison Office, also called a representative office, is a place of business to act as a channel of communication between the parent company and parties in India. It is mainly established to explore business needs, conduct market research, providing information about the parent company and its products to prospective customers in India or vice versa to its vendors. The Liaison office can undertake only those activities that are permitted under the regulations and cannot earn any income in India.
What is the Branch Office?
A Branch Office in India of a foreign company is an extension of the parent company operating in a different location while still being part of the same legal entity. It carries out business activities similar to those of the main company; however, it is subject to the permitted business activities under The Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulation, 2016. It is established to employ staff and promote goods and services. A branch office is not allowed to do manufacturing activities on its own; however, it is permitted to subcontract these to an Indian manufacturer.
Liaison Office vs Branch Office: Key Differences
The liaison office and branch office both offer foreign companies a way to enter the Indian market, but their scope of activities and eligibility requirements are distinct. Let’s explore key differences for better understanding.
Permitted Activities for Brand & Liaison Office
| Branch Office | Liaison office |
|---|---|
Branch Office: On the contrary, the branch office is prohibited from carrying out manufacturing and processing activities in India. It usually performs the same activities as its parent company. However, the specific list of permitted activities for a Branch Office in India is as follows:
| Liaison Office: A liaison office is a non-commercial place of business of the parent company and can only be engaged in specific activities that focus on market research, and relationship building. The activities which are permitted for the Liaison office In India are as follows:
|
Eligibility Criteria for Establishing the Branch or Liaison Office
The eligibility criteria for establishing a liaison office and branch office will be classified based on profitability track record and net worth, the following table illustrates the differences in the eligibility requirement for setting up the liaison office or branch office.
| S.No | Criteria | Liaison Office | Branch office |
|---|---|---|---|
| 1. | Priftabille Track Record | Three Year | Five Years |
| 2. | Networth | USD 50,000 | USD 100,000 |
Conclusion
Liaison Offices in India are designed for non-commercial activities like market research and communication and cannot generate income, while branch offices can conduct activities that are permitted, earn revenue, and remit profit after taxes. Liaison offices have fewer requirements and a shorter validity period compared to branch offices which require a high net worth, a large profit-making track record, and are subject to taxation. The choice between the two depends on the company’s business objective in India.
Author Bio
Juhi Pandey | in
Meet Juhi Pandey, a law graduate from the Faculty of Law, University of Delhi, passionate about corporate law research and writing. Specializing in FEMA, corporate laws, NCLT, and other legal frameworks, she delivers fresh insights and analysis on India’s evolving regulatory landscape, clarifying legal issues for practitioners and businesses.