Liaison Office Registration
Easy & Online Process

Liaison Office Registration

A Liaison Office (LO) functions as a place in India that represents a foreign company, primarily to understand and explore the general business environment, conduct market research for the products of the parent company, and provide and seek information from potential customers or vendors. A liaison office can be set up for representing the parent company or group companies in India, promoting export or import from or to India, promoting technical or financial collaborations between parent or group companies and companies in India, and acting as a communication channel between the parent company and Indian companies. A liaison office of the foreign company cannot engage in any commercial activities, and the parent company shall meet all its expenses. However, if it generates any income by conducting activities that constitute a business connection with the parent company, such income will be taxed under the Income Tax Act of 1961. Since a liaison office is not considered a separate entity from its parent foreign company, the taxes imposed are the same as those on a foreign company. As of now, the tax on the profit of the foreign company is charged at a rate of 40% of the total income generated.

Minimum Requirements for Liaison Office Registration

To register a Liaison Office of a foreign company in India, the following minimum requirements have to be met. These requirements deal with the net worth and profitability of the concerned foreign company and the name, business activity, and taxability of its liaison office established in India.

What is time taken for Liaison Office Registration?

It usually takes 3-4 months from the date of application to finally get a liaison office registered in India, including 40-60 days required for getting approval from the concerned AD Bank or RBI. You must remember that the liaison office must be registered and must become operational within 6 months from the date on which it has received such approval, because the approval will lapse after the expiry of 6 months.

What is the validity of a Liaison Office?

A Liaison Office is established and registered for 3 years at a time, except in the case of Non-Banking Finance Companies (NBFCs) and those entities engaged in construction and development sectors, for whom the validity period is two years only. Requests for extension of validity for LOs may be submitted before the expiry of the validity of the approval, to the concerned AD Category-I bank under whose jurisdiction the LO falls. The AD bank may extend the validity period of LO for a period of 3 years from the date of expiry of the original approval or the previous extension granted, only if the applicant has complied with the following conditions and the application has been filed accurately:

• The LO should have submitted the Annual Activity Certificates for the previous years, and
• The account of the LO maintained with the concerned AD Category – I bank is being operated in accordance with the terms and conditions mentioned in the approval letter.

Such extension has to be granted, as expeditiously as possible and in any case not later than one month from the receipt of the request of extension.

Such extension has to be granted, as expeditiously as possible and in any case not later than one month from the receipt of the request of extension.

How to Close a Branch Office of Foreign Company?

To close a Branch Office, first a resolution will have to be passed to this effect by the parent foreign company. After this, an application has to be filed to the Registrar of Companies, along with the prescribed documents. If the documents, including the Board Resolution, have a foreign origin or execution, they will have to be legalized by the Indian Embassy or Apostille Office, as applicable. The ROC will consider and examine the application. If satisfied with the application, he will issue a No Objection Certificate, permitting the closure of the Branch Office.

After obtaining the NOC from ROC, the concerned Branch Office will have to approach its AD Category-I Bank with the prescribed application and documents for closing its bank account. The documents of foreign origin or execution will have to be legalized again before submission. Given below is a complete list of documents to be submitted to the AD bank for closure of Branch Office:

• Copy of the Reserve Bank’s/AD Category-I bank’s approval for establishing the BO
• Auditor’s certificate
  • Indicating the manner in which the remittable amount has been arrived at and supported by a statement of assets and liabilities of the applicant,
  • Indicating the manner of disposal of assets
  • Confirming that all liabilities in India including arrears of gratuity and other benefits to employees, etc. of the office have been either fully or adequately been paid off, and
  • Confirming that no income accruing from sources outside India (including proceeds of exports) has remained unrepatriated to India.
• Confirmation from the applicant/parent company that no legal proceedings in any Court in India are pending against the BO and there is no legal impediment to the remittance.
• No Objection Certificate from the Registrar of Companies
• The designated AD Category – I bank has to ensure that the BO has filed its respective AACs in all the previous years.