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 Branch Office Process in India
| Eligibility |
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| Timeline | 2-3 Months |
| Cost | Approx USD 2000 |
| Indian Representative | Resident Indian is Required with Aadhar Number |
| Brief Process | 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 we can help you! |
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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
- All India Service by Setindiabiz
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/blog/permitted-activities-of-branch-office-india Following is the list of permitted activities in India.
- Export/Import of Goods
- Professional and Consultancy Services
- Research and Development
- Fostering Collaborations
- Representation of The Parent Company
- IT and Software Development
- Technical Support
- Representing Foreign Airlines/Shipping Companies
Note: The approval for the above listed business activities to a Branch Office is processed under the automatic route, whereas in case the proposed business is beyond the scope listed, a detailed application can be filed to seek specific government approval, which may be given to the sole discretion of the government of 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)
- Colour Photo
- PAN Card
- Aadhar Card
- Passport
- Address Proof not older than Two Months
Indian Office Address Proof
- Proof of Registered Address of Branch Office (Utility bills / Rent Agreement / Lease Agreement / Property Tax Receipt)
- NOC From the Owner
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-1 : 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-2 : 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-3 : 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-4 : 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-5 : 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-6 : 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-7 : 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
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.
- 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
Frequently Asked Questions
Q1.What is the time taken for Branch Office Registration in India?
It usually takes 3 to 4 weeks from the date of application, for a branch office to get registered. You must remember that the branch office must be registered and must become operational within 6 months from the date on which it has received approval by the RBI, because the approval will lapse after the expiry of 6 months.
Q2.What is the 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 15-22% on an Indian company.
Q3.Can Branch Office maintain more than one account in India?
No, if an LO/BO wants to open more than one account it has to obtain prior permission of the Reserve Bank through its AD Category I bank justifying the reason for the additional account.
Q4.Whether the Branch Office is required to register/report with Police authorities?
Only applicants from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong, Kong, Macau and Pakistan shall have to register with the State Police authorities. Copies of the approval letter for persons from these countries shall be marked by the AD Category I bank to the Ministry of Home Affairs, Internal Security Division – I, Government of India, New Delhi for necessary action and record. All other countries are exempted from registering with the State Police authorities.
Q5.Can a Branch Office of the Foreign Company acquire property for its operation?
The BO /PO of a foreign entity, excluding an LO, 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. However, entities from Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, Nepal, Bhutan, China, Hong Kong and Macau require prior approval of the Reserve Bank to acquire immovable property in India for a BO/PO. BOs/LOs/POs have general permission to carry out permitted/ incidental activities from leased property subject to lease period not exceeding five years.
Q6.Can agents of overseas shipping or airline companies continue to maintain foreign currency accounts with the designated AD Category-I Banks In India after such airline or shipping companies have set up Branch Office (BO) in India?
Yes, however, BO’s transactions should be restricted to its designated INR account and it should not put any transactions through the agent’s foreign currency account.
Q7.Whether for closure of additional offices, the same procedures as mentioned in ‘Closure of Branch Office’ need to be adhered to?
Ans. Yes
Q8.Whether AD Category-I Bank approve the transfer of assets of the Branch Office to a third resident party?
Ans. Yes
Q9.Can a subsidiary of an Indian company abroad open a Branch Office in India, and whether this will come under automatic route?
Ans. No
Q10.Can Branch Office open FCY account for doing normal business transactions?
Ans. No
Q11.Can BO/PO/LO have one more account with another AD Category-I Bank(Agency bank for tax payment) for statutory payments when the AD with whom the account is maintained is not the agency bank?
Ans. Yes
Q12.Whether LC can be opened for BO in India for export/import of goods & in case of PO, local LC can be open for purchase of goods locally in India (local purchase of goods to execute a project)?
Ans. Yes
Q13.Whether a branch office (BO) or project office (PO) can send outward remittances, permissible under FEMA, through any AD Category I bank or it has to be through the designated AD Category I bank only?
Wherever the BO or PO is required to remit funds outside India, within the applicable guidelines under FEMA, they may do so not necessarily through the designated AD Category I bank but through any AD Category I bank of its choice subject to obtaining no objection certificate (NOC) from the designated AD Category I bank. The remittances have to be for transactions settling on Cash / Tom / Spot basis only. The remittance has to be through banking channel in either of the two methods:
- The designated AD category I bank will transfer equivalent INR amount to the transaction handling bank. The transaction handling bank can remit the amount to the overseas parent office of BO / PO through SWIFT. However, the transaction handling bank will have to ensure KYC compliance and the necessary documentation. It will also be required to share the SWIFT message along with the details like UIN No, beneficiary and remittance details with the designated AD category I bank.
- The designated AD category I bank will transfer equivalent INR amount to the transaction handling bank. The transaction handling bank will then credit the NOSTRO account of the designated AD Category I bank which in turn will remit the amount to the final beneficiary.