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Branch Office Registration of a Foreign Company

A Foreign Company / Corporation can establish a branch office in India by obtaining prior approval of the reserve bank of India and after that registering a company with the Registrar of Companies

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ECONOMY OVERVIEW

Region:

South Asia

Income category:

Lower middle income

Population:

1,311,050,527

GNI per capita (US$):

1,590

Young working population

 

Branch Office Registration India :

There are various methods by way of which a foreign company can enter India economy, and the decision of a particular format depends on the business objective and the purpose for which the foreign company or corporation is coming into India. If the purpose is to study Indian Market, potential, or to spread awareness of the product or services, then the best choice would be to form a liaison or representative office of the foreign company. However in case, the objective is to book orders, but the delivery of goods or services shall be the responsibility of the head office, a branch office of the foreign company is a good choice. A branch office or a liaison office is a foreign company for tax laws and Indian government taxes the profits of such entities at higher rates. As of now the tax on the profit of the foreign company is 40% in contrast to the tax rate of 30% on Indian company.

Establishment of Branch Office:

A Branch Office Registration in India is carried out in accordance with the guidelines of Reserve Bank of India in pursuance of Section 6(6) of Foreign Exchange Management Act, 1999 ("FEMA") read with Notification No. FEMA 22/2000-RB dated May 3, 2000. Indian Laws are dynamic and based on the changing needs the regulations in Foreign Exchange Management Act are revised time to time. As of now, the regulatory body is the central bank of India (Reserve Bank of India) which accepts the application for registration of the branch office in India through its designated banks. The decision concerning approval of registration of a branch office is discretionary, and the central bank can ask for more information and clarification from the applicant. We have been assisting many foreign companies in getting their branch office registered in India.

Important Points

01
To open a branch office in India, the foreign parent company must have a profitable track record of five years in a row
02
Branch office name must be same to that of the foreign parent company
03
The net worth of the parent company must be more than USD 1,00,000/- duly attested by the auditors.
04
All the profits that a branch office earns are freely allowed to be remitted from India with the payment of applicable taxes.
05
For each new office of branch office in India, a fresh approval is required with justification of opening such other place of business
06
Branch office of foreign entities in India has to pay 40% (plus surcharges as applicable) of profits

Documentation

01
Certificate of Incorporation / Charter issued by the foreign company, Memorandum and Articles of association of parent company
02
A declaration that the parent company shall meet any shortfall in meeting expenses of branch office
03
Five years historical Financial Statement of the parent company duly attested by its auditors
04
A certificate from the auditors of the parent company that the new worth of the parent company is more than USD 1,00,000
05
The banker of the parent company shall be required to confirm the correctness of KYC documents of parent company filed with RBI
06
The identity and address proof of the responsible person to do compliance for the branch office and his consent to act so

For Registered Address in India

01
The branch office need to maintain a physical office in India, and for that purpose, a letter of No Objection is required from the owner of the premises along with ownership proof of such premises
02
The virtual offices or shared work places do not qualify to be the registered office of the branch office of a foreign company, as the law requires maintenance of registers and books of accounts at such registered office of the branch office of the foreign company.
03
ATTESTATION OF DOCUMENTS:The process of registration of branch office begins with documentation and its legalisation/attestation. All the reports to be filed for registration can be attested in India if the same is present in originals within the territory of India for verification and the foreign person is holding a business Visa. In all other cases, the documents require attestation in the country of origin at the office of Indian High Commission, or it may be apostille as per Hague convention.
 

PROCEDURE OF BRANCH OFFICE REGISTRATION

STEP 01
ATTESTATION OR LEGALISATION OF DOCUMENTS

All documents which are required to be filed with RBI of the foreign company like their certificate of incorporation, board resolutions, the moa and articles of the foreign company and the documents of authorised signatory of the foreign company need to be legalised either through Indian Embassy or to be apostilled as per Hague convention.

 ATTESTATION OR LEGALISATION OF DOCUMENTS
STEP 02
FILING OF APPLICATION WITH AD BANK

The application for registration of branch office of a foreign company is filed in FNC to the reserve bank of India through AD Bank. If the business activity is within 100% FDI policy, then the application is processed by RBI accordingly, and in any other case, it does so with the consultation of concerned ministry.

 FILING OF APPLICATION WITH AD BANK
STEP 03
VERIFICATION OF KYC FROM BANKER

After FNC Form is filed the AD Bank, a swift based verification of documents filed for the foreign company is requested from the banker of the foreign company. After receipt of confirmation, the application for approval of the RBI is sent by the AD Bank. Usually, RBI approves within 2-4 months subject to its assessment being satisfactory.

 VERIFICATION OF KYC FROM BANKER
STEP 04
REGISTRATION WITH THE ROC

After approval of the RBI for the establishment of the branch office in India, an application for registration of branch office of the foreign company is filed within 30 days of such approval. In case there are Indian directors the DIN number of such director is needed, and the digital signature of the authorised signatory is required to e-file statutory forms with the ROC for their approval.

 REGISTRATION WITH THE ROC
STEP 05
PAN, TAN & BANK ACCOUNT

Income tax Department allots a unique 10 Digit alpha numeric number as a permanent account number, also known as PAN Number. To comply with TDS provisions every tax payer need to obtain a Tax Deduction Account Number. These identification numbers are essential to operate and comply. The bank account of the branch office can be opened after PAN allotment.

 PAN, TAN & BANK ACCOUNT
STEP 06
FURTHER REGISTRATION AND LICENSES

After the branch office is operational, there is various other compliance related activities are done which depends on the nature of the business and the state government laws which apply to businesses in that particular state. For example registration under shops and establishment act, Goods and Services Tax (GST), Professional Tax Act, Provident Funds Act, Employee State Insurance Act (ESIC), etc.

 FURTHER REGISTRATION AND LICENSES