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8 Activities that are permitted for Branch Office of Foreign Companies in India

A Foreign Company can open branch offices in different countries. These branch offices carry out the activities of the parent company in the countries where these are set up. All the expenses of the branch office are paid off by the parent company, and all the revenue generated by it is transferred to the parent company as well. These branch offices are regulated under two most relevant Indian laws, namely, the Companies Act, and the RBI Act.
A branch office of a foreign company or a body corporate incorporated outside India, including a firm or other association of individuals, are permitted to carry out only a certain set of activities. These activities have been notified by the Reserve Bank of India. In this blog, we are concerned with informing our readers about all the activities that the branch office set up in India by a foreign company can carry out.

Table of Contents

What is a Branch Office?

Branch offices are alternative offices set up in locations other than the location where the head office or the main office of a business is located. It is not to be confused with a subsidiary office, as it does not have a legal identity separate from its parent company. Simply put, a branch office is an office which carries out the business of a company (Parent Company) without having a separate legal identity, in the location where it is set up. The main purpose of setting up a branch office by a company is to expand its business presence and consumer base in different locations, domestically and internationally.

Procedure for Setting up a Branch Office

The branch office of a foreign company can be set up in India, only after the approval of the Reserve Bank of India, under the Foreign Exchange Management Act, 1999. For obtaining the approval, an application is required to be filed to the RBI, which it either approves under the normal route, or the government approval route, depending on the sectoral FDI limits.
The normal approval is considered if the branch office is conducting activities which allow 100% FDI. However, an additional government approval is required if the branch office is carrying out activities where a 100% FDI is not permitted. Here, the RBI approves the application only after consultation with the Central Ministry of Finance. Upon approving the application, the RBI finally issues a licence for opening the branch office to the foreign company.
However, before approving the application for opening the branch office, the RBI also considers the track record of profit earning and the net worth of the parent company.
  • A foreign company can open a branch office in India only if it has a track record of profit earning in the immediate five financial years in its country of origin.
  • As far as the net worth is concerned, only foreign companies with net worth equal USD 100,000 or more than that, can set up a branch office in India.

Permitted Activities for Branch Office of a Foreign Company

Foreign Companies engaged in manufacturing or trading activities, can open their branch offices in India, only for activities permitted by the Reserve Bank of India. We have provided the entire list of such permitted activities below.
S. No. List of Permitted Activities for Branch Offices of Foreign Companies
1content
Export and Import Activities
2
Professional or Consultancy Services, subject to sectoral regulators policy or approval. Please note that Hon’ble Supreme Court of India vide its order dated July 4, 2012, and again on September 14, 2015, has barred foreign law firms from opening a branch office.
3
To carry on research work for the areas where the parent company is engaged
4
To engage in activities which promote technical or financial collaboration between Indian companies and parent or overseas group company
5
To act as a buying or selling agent in India or to represent the parent/group company
6
To engage in any business or technical activities for software development or for the rendering of any service related information technology.
7
To provide technical support services to the clients in India for the goods or services supplied by parent/group company
8
To act as an authorised representative for a foreign shipping or airline company in India

Conclusion

Opening a Branch Office of a Foreign Company is not an easy job but with correct information one can set up their branch office in India This article was aimed to help understand the basic requirements, procedure & documentations.

How can Setindiabiz help?

Here, at Setindiabiz, we provide assistance in the registration of all types of businesses. To avail our services of Company registration, request a callback from our startup advisors. 

About Setindiabiz

Setindiabiz is an organized team of experienced CA, CS, & Lawyers, duly supported by a pool of trained accountants & paralegal staff that provides quality & affordable compliance services to startups & small businesses in India. The views, statements and recommendations expressed in this article or post are only for the sole objective of providing information, and it does not constitute professional advice or recommendation of the company. Neither the author nor the company or its affiliates accepts any liability for any loss or damage arising from any information in this article or any actions taken in reliance thereon.

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