- Documentation Support (Includes Drafting)
- Filing of FNC Form to RBI through AD Bank
- Digital Signature for the Authorised Signatory
- Registration of Foreign Company with ROC
- Registration with Local Police
- PAN & TAN Number for the Company
- Bank Account Opening Support
- GST Registration
- Import Export Code (IEC)
- Government fee & Taxes on Actual Basis
Liaison Office Registration
A Liaison Office (LO) functions as a place in India which represents a foreign company primarily to understand and explore the general business environment, market research for the products of the parent company and to provide and seek information from potential customers or vendors. A liaison office can be set up for representing in India the parent company/group companies, Promoting export/import from/to India, Promoting technical/financial collaborations between parent/group companies and companies in India and to Act as a communication channel between the parent company and Indian companies.
A liaison office of the foreign company can not engage in any commercial activities, and the parent company shall meet all the expenses of the liaison office. A liaison office is a foreign company and Indian government taxes the profits of such entities when it carries out the transactions which amount to commercial activities through a permanent establishment (PE) at higher rates. As of now the tax on the profit of the foreign company is 40% in contrast to the tax rate @ 22% on Indian company.
Important Points to Register Liaison or Representative Office
Net Worth Requirement: The foreign parent company must have a profitable track record of three years in a row & the net worth must be more than $ 50,000 attested by their auditors.
No Income Generating Activity: The liaison office can not earn any income in India, and the parent company must finance all its operations. An undertaking from the parent company is required.
Name & New Office: The name must be same as that of the foreign parent company, and for each new office of such liaison office, a new approval is required from RBI with justification.
Taxation in Indian: The income tax on a Liaison Office can be imposed by Indian tax authorities when it is established that the transaction amounts to commercial operation through PE.
List of Documents for Liaison Office Registration
|A. Document From Mother/Parent Company (If Applicable)||B. Documents Required From the Authorised Signatory|
Preparation & Documentation for Registration of Liaison Office
The establishment of place of business in India for a foreign company/corporation is governed by the 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. For the purpose of setting up a liaison office following is the most important qualifications.
- No income generating activity is permitted
- The networth of foreign head office must be above $ 50,000
- The applicant company should have profitability track record of three years.
Only four kinds of activities are permitted for the liaison office, please refer - Permittd Activities for Liaison Office for details
After we receive the complete set of basic documents we shall draft following documents for signature by the applicant company and the authorised signatory
- Board Resolution approving the opening of the liaison office in India
- Declaration from the applicant on FDI eligibility and source of fund
- Declaration about the nature of the activity, the location of the activity of proposed LO and nature of the activity, the location of activity of the applicant company.
- Form FNC
- Letter of Comfort form holding company
Legalisation of Documents: All documents which are originating from a foreign country or which is signed/executed in a foreign country shall be legalized either through Indian Embassy or to be apostilled as per the Hague Convention.
Process & Timeline for Liaison office Registration in India
Step - 1:
Application for Digital Signature of Authorised Signatory
A digital signature is the equivalent of physical or paper signature under the information technology act. As per new process all applications to the registrar of companies are filed in digital format which need to be authenticated by the digital signature of the proposed shareholders and directors as the case may be. The filing process starts with the issue of digital signature for all the promoters.
Step - 2:
Filing of Application with RBI through AD Bank
The application for registration of a Liaison office of a foreign company is filed in FNC to the reserve bank of India through AD Bank (Authorised Dealer). The AD Bank plays a crucial role as all the communication to the RBI has to be routed through them. We have an excellent relationship with many banks in India, which certainly help in applying to the RBI and Follow Up.
Step - 3:
Verification of KYC from Banker of Parent Company
After FNC Form is filed with the AD Bank, a request for verification of documents is sent to the banker of the foreign company. This process is also known as swift based verification. After receipt of confirmation of the documents from the foreign banker, the application is submitted to the RBI for their approval. The RBI may seek clarification or any additional document which need to be submitted..
Step - 4:
Approval of RBI for Liaison Office Registration in India
There is a specific policy of approving the establishment of a liaison office by the AD Banker itself and only cases where the automatic route is not available the cases are forwarded for prior approval of the RBI. The process of approval after swift verification is of a week.
Step - 5:
Registration of Liaison office with the ROC
After company incorporation, the Bank A/c has to be opened, wherein the FDI (foreign direct investment) must reach within 180 days of incorporation of the company with advance intimation to Banker. Please note that the new company can not start any of its business activities unless the capital has been received in India.
Step - 6:
PAN Card, Tax Deduction Number & Bank A/c Opening
Income Tax Department allots a unique 10 Digit alphanumeric number as a permanent account number, also known as PAN Number. To comply with TDS provisions, every taxpayer needs to obtain a Tax Deduction Account Number. These identification numbers are essential to compliance with the tax rules. The bank account of the liaison office can be opened after allotment of Pan Number by the Income Tax Department.
Step - 7:
Registration with State Police
Finally, the liaison office needs to register it with the state police (In the office of the superintendent of Police). The application must be accompanied by the RBI approval and KYC of all authorised persons in India and the foreign company.
Step - 8:
GST Registration & IEC
By this time the Liaison office would have received the Bank Account and cheque book, we would need a copy of the check for making application for GST Registration and Import Export Code for the Liaison Office of the foreign Company
Frequently Asked Questions
What is a liaison office & Who can set-up a liaison office?
A foreign company before entering the Indian market may intend to conduct some preliminary research or representation before the potential customers or partners, for that limited purpose a foreign company normally establishes a representative office also known as a Liaison Office in India. Any person resident outside including a foreign company, group company, association of person can establish a liaison office in India.
What is permitted/allowed activities for a branch office in India of a foreign entity?
A liaison office of a foreign company is allowed to do only limited activity in India, provided none of the activities is profit-making activity. In other words, a liaison office can do market research and representation activity only. Click to see the List of permitted activities for a Branch Office in India.
What is Income Tax rate for a Liaison office of a Foreign Company?
A Liaison 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 are the conditions /requirements for opening a Liaison office in India?
The liaison or representative office of a foreign company can be opened if the applicant foreign corporation has a track record of profit generation for the past 3 years and it is financially sound. When we say financially sound in the context of a representative or liaison office establishment in India of a foreign company, we mean net-worth of USD 50,000 or its equivalent. The financial statement duly attested by the statutory auditor of the parent company is required.
What Documents are required for forming a Liaison Office in India?
Following documents are required for registration of a liaison office of the foreign company
- Certificate of Incorporation or business license of parent company
- Charter issued to the foreign company by the government
- Memorandum of Association or Articles (Rules of the Company)
- A declaration from the foreign corporation (parent company) that the parent company shall meet any shortfall in meeting the expenses of branch office
- Three years historical Financial Statement of the parent company duly attested by its auditors
- A certificate from the auditors of the parent company that the net worth of the parent co is more than $ 50,000 or its equivalent.
- The identity and address proof of the responsible person to do compliance for the branch office in India.
- Premises proof, where the branch office shall be registered
- A No objection certificate from the owner of the premises of office.
- In case the document is in the foreign language, then a certified translation thereof must be filed.
- All the document having foreign origin shall be legalised as per Hague convention or by the Indian embassy, high commission.
What are Other Incorporation Requirements for Liaison Office Registration in India?
After approval of the RBI for establishing a Liaison office in India by a foreign company is obtained the same need to be registered with the ROC within 30 days by filing form FC-1 with the digital signature of the authorised person and following documents as annexure
- A certified copy of the charter, statutes or memorandum and articles, of the company or other instrument constituting or defining the constitution of the company and, if the instrument is not in the English language, a certified translation thereof in the English language;
- The full address of the registered or principal office of the company;
- A list of the directors and secretary of the company containing such particulars as may be prescribed;
- The name and address or the names and addresses of one or more persons resident in India authorized to accept on behalf of the company service of process and any notices or other documents required to be served on the company;
- The full address of the office of the company in India which is deemed to be its principal place of business in India;
- Particulars of opening and closing of a place of business in India on earlier occasion or occasions;
- A declaration that none of the directors of the company or the authorized representative in India has ever been convicted or debarred from the formation of companies and management in India or abroad; and Any other information as may be prescribed.
What are the countries for which liaison office registration cannot be done under the automatic route and can be established only after prior approval is received from the RBI?
- Sri Lanka,
- Hong Kong,
- Or any application for opening of a branch office in Jammu & Kashmir, North East Region and Andaman and the Nicobar Islands.
Who approves the setting up of a liaison office?
The RBI is empowered to approve the establishment of a liaison office in India, under master direction dated January 01, 2016 for the establishment of a place of a foreign corporation the powers have been delegated to any AD Category 1 Banker.
How to set up a Liaison Office in India?
To set up a liaison office first check the eligibility of being financially sound in terms of the network not being less than USD 50,000 or its equivalent. Then call setindiabiz representative to discuss documentation and stepwise process. That's it, rest shall be taken care by the professionally qualified CA, CS and Advocates.
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