Branch Office Registration

Of Foreign Company in India

A foreign company’s branch office can start full-fledged operations in India after obtaining permission from the RBI and registration with the ROC. Setindiabiz offers expertise in establishing a Branch Office, Tax Filings, and payroll.

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Overview of the Company Registration Process in India

Five Years of Profitable Track Record
Net Worth Should be more than USD 100,000/-

2-3 Months

Approx USD 2000

Resident Indian is Required with Aadhar Number

An application in the FNC-1 Form needs to be submitted to the Reserve Bank of India (RBI) through an Authorised Dealer (Bank) to seek approval from the RBI. The approval under the automatic route is granted if the sector’s activities are eligible for 100% Foreign Direct Investment (FDI). However, in all other cases, the approval process may take additional time as it is processed under the Government approval route.

How to establish a Branch Office in India?

A branch office is a great way for a foreign company to expand its operations in India. By setting up the branch office in India, the foreign company does not create a new legal entity but obtains permission to operate as a foreign-incorporated legal entity in India. The Branch office carries exactly the same name and identity in India; however, it can undertake only a few permitted activities that are allowed for a Branch Office in India. For instance, it cannot engage in manufacturing, processing, and retail trading activities. To establish a Branch Office in India, prior permission from the RBI is required; we help foreign companies receive the approval to establish a Branch Office in India.

Important Points

Fast & Online Process

No Need to Visit India

Limited Permitted Activities

We help you to get started

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Eligibility Criteria for Branch Office Registration of Foreign Company

To register a branch office in India, the foreign company must ensure that it meets the minimum criteria prescribed under Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016 (Notification No. FEMA 22(R)/ 2016-RB). The criteria for setting up the branch office of a foreign company is concerned with the minimum net worth, profitability track record and the proposed business activities in India. The table below provides detailed information.

At least $100,000 of net worth

The foreign parent company must have a net worth of more than $100,000/- supported by duly audited financial statements. The network means the paid-up capital plus free reserve.

Five years of profit-making track record.

The Foreign company must have a track record of profit-making for five years immediately preceding the date of application for RBI approval. We advise you to check the audited financial statements to verify if there is a loss in any of the previous five financial years.

Name of Branch Office same as Parent Company

The Indian Branch Office shall be established and will carry the same name and identity as the establishment of a Branch Office. No new legal entity gets incorporated in India, but a foreign-incorporated entity obtains permission to operate in India by following the prescribed procedure.

Similar Business Activity

The branch office in India must carry out the same activities as its parent company; however, the activities need to be within the permitted list of activities as per the RBI notification. The permitted list of activities for a Branch Office is discussed in a separate section.

The Branch Office can carry out only permitted activities.

Unlike a wholly owned subsidiary, which can do any business activity as a separate legal entity in India, the Branch Office of a foreign company can undertake only a limited set of activities. You are advised to read our analysis on the permitted list of activities for a Branch Office at https://www.setindiabiz.com/permitted-activities-of-branch-office-india. Following is the list of permitted activities in India.

Documents required for Branch Office Registration

Documentation is a crucial aspect of Branch Office Registration in India. At different stages of establishment, very basic documents are filed with the RBI and the Registrar of Companies to satisfy the applicant’s eligibility, the directors’ KYC, and the Indian Resident Authorized Signatory. Here is the list of documents required to establish a Branch Office in India.

Applicant (Foreign Company)

Duly Filled Form FNC-1
Board Resolution
Certificate of Incorporation,
Articles or Charter of parent company
Audited financial statements of 5 Years
Bankers Standing Report
List of Shareholders & Directors
KYC of all Directors

Authorised Signatory (Resident Indian)

Legalisation of Documents

Documents that originate from overseas, such as the applicant certificate, charter, financial statements, board resolution, etc., are required to be legalised by attestation before the notary, Indian embassy, or apostille as per the applicable method of legalisation of the documents. Please refer to our Article on Legalisation of Documents.

The process of Branch Office Registration in India.

Establishing a Branch Office in India is an entirely online process that involves preparing and legalising documents and filing the FNC-1 application with the RBI through an Authorised Dealer (AD) Bank. The AD bank is an intermediary between the RBI “Regulator” and the applicant “Foreign Company”. After the permission to establish the branch office is granted, the foreign company then registers with the ROC. Following are the logical steps that you should take to establish a Branch Office in India.

STEP

Eligibility Check & Documentation

The first step should be to check the eligibility of the foreign company and arrange all the required documents for Branch Office Registration in India. We can assist with drafting the Documents are required to file the application and seek the approval of the RBI. After the documents are properly drafted, the same needs to be legalised by a Notary Attestation in case the applicant is from a Commonwealth Country or Appostile in case the applicant country is party to the Hague convention. In all other cases, the documents originating or executed in a foreign country would require attestation by the Indian Embassy or Couselete office.

STEP

Filing FNC-1 Form to seek RBI Approval

The Reserve Bank of India is the regulatory authority that issues permission to establish a Branch Office in India. For that purpose, the application is filed in Form FNC-1, along with all the supporting documents. The AD Bank verifies the applicant’s KYC and examines the application for completeness. In the process, the AD Bank may seek clarification or change some documents.

STEP

Approval of RBI for Branch Office Registration in India

In general, the AD Bank is authorised by the RBI to approve the application for the establishment of the Branch office and then submit the application for the generation of a unique identification number (UIN) for the Branch Office, provided the applications are for the sector where 100% FDI is permitted. However, in the following situation, the RBI conducts a comprehensive review of the application and grants its permission on a case-to-case basis.

The cases where the application to establish a Branch Office in India is from countries such as Pakistan, Afghanistan, Iran, China, Bangladesh, Sri Lanka, Hong Kong, or Macau.
Where the applicant is an NGO or Non-Profit Organisation
Where the proposed activity is not allowed for 100% FDI or the applicant is involved in the strategic sector, such as telecom, defence, private security, or Information and Broadcasting services.
The application seeks to establish a branch office in the North Ester States, such as Assam, Manipur, Jammu, Kashmir, Ladakh, or the Andaman & Nicobar Islands.

STEP

Registration of the Branch Office with the ROC

Once the AD Bank or the RBI grants permission to establish the Branch Office, the next step is to register it with the Registrar of Companies (ROC) within 30 days of the approval. The application to ROC is filed in form FC-1 along with the foreign company’s documents and the RBI’s permission.

STEP

Opening Of Bank Account, GST and IEC etc.

The next step is to open a bank account for the branch office to start its operations. The Indian branch can receive remittances from the parent company or from the customers. The GST Registration is needed to provide services in India or to sell goods. You may also need an Import Export Code (IEC).

STEP

Other Registrations and Licences

Depending on the nature of business activities and the location of the office of the Branch office, the Branch Office may need some specific registrations or licences such as Shops and Establishment Registration, Professional Tax Registration, Registration with the Labour Welfare Fund (LWF) etc, FSSAI or Drug Licences etc. EPF Registration, ESI Registration.

STEP

Registration with State Police

The branch office of a foreign company in countries like Pakistan, Afghanistan, Iran, China, Bangladesh, Sri Lanka, Hong Kong or Macau needs to register itself with the office of the Police Superintendent in whose jurisdiction the office of such branch office is situated.

The Branch Office is taxed as a Foreign Entity

The branch office of foreign corporations is subject to a higher rate of base income tax of 40% in comparison to domestic companies or the subsidiary of foreign companies, which is subject to tax at 15-22% plus an applicable surcharge. The Branch office is taxed for the Income Received or accrued in India in the capacity of the foreign company’s Permanent Establishment (PE). The following shall be the net Tax rate after considering the surcharge and cess.

No.	Taxable Income	Effective Tax rate
1	Below INR 10 Million	41.60%
2.	Below INR 100 Million	42.43%
3.	Above INR 100 Million	43.68%

Incorporate an Indian Subsidiary for greater flexibility and lower tax rates.

The branch office has a limited scope of operation in terms of permitted activities and is subject to a very high Income Tax rate. On the other hand, Incorporating a wholly-owned subsidiary makes greater sense in view of its ability to undertake all kinds of business activities at par with any other domestic company. The Income tax for a subsidiary of a foreign company shall be 15% in the case of manufacturing activities and 22% in the case of other activities.

Annual Returns for the Branch Office

The foreign company’s branch office must adhere to the relevant provisions of the Companies Act, FEMA, and Income Tax Act, among others. These laws mandate that annual returns be submitted to regulatory bodies such as RBI, the Income Tax Department, and the Registrar of Companies. The table below attempts to provide the most common annual filings along with their due dates and the relevant regulatory body.

Name of Return	Last Date	RBI	ROC	Income Tax
Form FC 4	30 May
Statutory Audit	30 September
Form FC 3	30 September
Annual Activity Certificate (AAC)	30 September
Income Tax Return (ITR)	30 September
Tax Audit	30 October

Annual ROC Returns by the Branch Office

The branch office is a Permanent Establishment of the foreign company and is registered with the ROC. It must file two annual returns to the Registrar of Companies (ROC) office. The annual filing to the ROC is mandatory for every Branch office.

Statutory Audit: The foreign company's branch office is considered a Permanent Establishment (PE) and thus comes within the scope of the Statutory Audit under section 139 of the Companies Act. The FEMA Regulations also require the filing of the Annual Activity Certificate from a CA with the audited financial statement; therefore, the Audit is applicable to the Branch Office. The audit should be completed well before the due dates of filing the AAC and ROC Return in form FC-3, for which the due date is 30th September.
Form FC-4: Every branch office of a foreign company established in India must file an annual return with the ROC within 60 days of the end of the financial year, i.e., 30 May of the current year for the previous financial year. The FC-4 filing provides general operational information of the branch office to the ROC on a year-to-year basis.
Form FC-3: The financial statement of the branch office, duly audited by a practising chartered accountant, is filed with the ROC in prescribed form FC-3 within six months of the close of the financial year. The due date for the previous financial year for filing the FC-3 is 30 September.

Annual Filing To RBI & Income Tax Department

Annual Activity Certificate: In short, also known as AAC, is a certificate to be obtained from a practising Chartered Account for the year ended on 31st March to certify that the activities of the branch office in india were in accordance with the permission it has from the RBI. The annual activity certificate, along with the audited financial statement of the Branch Office, is to be filed before 30th September to the RBI through the AD bank and to the Director General of Income Tax (International Taxation).
Income Tax Return: The branch office's income tax (ITR) return is filed with the income tax department annually through the online filing portal with digital authentication. The process is completely online; no attachment is attached to the ITR. However, to file the ITR, the Branch Office must have its audited financial statement ready. The last to file the ITR is 30th October for the previous financial year. However, the branch office can file its ITR on or before 30 November if the tax audit is applicable.
Tax Audit: Under section 44AB of the Income Tax Act, every branch office, being an Income Tax Assessee, is required to get its financial statement audited by a practising chartered accountant if the turnover or revenue during the relevant financial year is equal to or more than INR One Crore. The limit of one crore should be read as ten crores if the receipts or payments made by the branch office are mostly through banking mode and the cash component is less than 5%. The last date to furnish the tax audit report is 30th September.

Frequently Asked Questions About Company Registration

What is Income Tax rate for a Branch office of a Foreign Company?

A branch office of a foreign mother company is not treated as a separate and distinct entity in India and for all tax purposes, the Indian government taxes the profits of such entities at higher rates. As of now the Income Tax on the profit of a foreign company is 40% in contrast to the tax rate of 30% on an Indian company.

What is permitted/allowed activities for a branch office in India of a foreign entity?

A branch office of a foreign company, a body corporate incorporated outside India, including a firm or other association of individuals is permitted to any activities which are allowed or permitted for the furtherance of the parent company objectives in compliance with RBI notification. Click to see the List of permitted activities for a Branch Office in India.

What are the countries for which Branch office registration cannot be done under the automatic route and can be established only after prior approval is received from the RBI?

Pakistan,
Bangladesh,
Sri Lanka,
Afghanistan,
Iran,
China,
Hong Kong,
Macau
Or any application for opening of a branch office in Jammu & Kashmir, North East Region and Andaman and the Nicobar Islands.