Updated : January 04, 2024Permitted Activities for Branch Office in India | Complete List
Overview : This article aims to comprehensively understand the permitted activities for a foreign company's branch office in India. It seeks to empower foreign companies interested in setting up a branch office in India by providing insights into the activities they can legally undertake. It also highlights the limitations and regulations that govern branch offices and offers guidance on making informed decisions to ensure a smooth and successful transition.
If you are a foreign company looking to enter India’s vast market, establishing a branch office can be a strategic decision, providing you with access to a thriving consumer base and a wide range of opportunities. The Foreign Exchange Management (Establishment in India of a Branch Office, Liaison Office, Project Office, or any other Place of Business) Regulations, 2016 , marks a significant milestone in India’s foreign exchange regulatory framework. The regulation, issued in 2016, is followed by The Master Direction (RBI/FED/2015-16/6, FED Master Direction No.10/2015-16) issued by the Reserve Bank of India, which prescribes the list of permitted activities for a Branch Office. In other words, foreign corporation Branch Offices can only carry out the following activities in India.
Now, let's explore the activities your branch office can legally undertake
- Export/Import of Goods : To facilitate seamless trade between India and the world, please note that compliance with the Foreign Trade Policy is mandatory. This involves obtaining an Import Export Code (IEC) and an import or export licence, if applicable to the imported or exported product. You may also need to register for RCMC, AD Code, Icegate (Customs Trade Facilitation Portal), and Port Registration to import and export goods.
- Professional and Consultancy Services : Share the expertise of the foreign corporation with Indian businesses and individuals through the Branch Office, offering specialised services like engineering, marketing, or financial consulting (excluding legal practice).
- Research and Development : Delve into areas aligned with your parent company’s expertise and establish R&D centres in India, where a large pool of talented professionals is available at a lower cost than developed nations. This approach allows your parent company to tap into the expertise of the Indian workforce while also benefiting from cost savings.
- Fostering Collaborations : Bridge the gap and create partnerships between Indian companies and your parent company or affiliates to facilitate knowledge and technology transfer. By promoting these collaborations, the Branch Office can help build a strong and mutually beneficial relationship between the parties involved, which can lead to the developing of new products, services, and innovative solutions.
- Representation of The Parent Company : The Indian Branch Office will operate as the representative of the parent company and is responsible for overseeing and managing the company’s day-to-day operations in India. This includes building and maintaining relationships with various stakeholders, such as customers, suppliers, and government authorities. The branch offices may also act as buying or selling agents for foreign companies.
- IT and Software Development : India is well-known for its talented pool of software developers and IT professionals proficient in the latest technologies and programming languages. By leveraging this workforce, businesses can develop cutting-edge software solutions that cater to the local market demands or even support the global operations of the parent company. With abundant skilled resources and cost-effective solutions, India has become a preferred destination for outsourcing IT and software development.
- Technical Support :To provide specialised technical support services to customers of foreign parent companies in India using products supplied by parent/group companies.
- Representing Foreign Airlines/Shipping Companies : To act as a local representative for foreign airlines or shipping companies, the branch office is crucial in facilitating international travel and trade. The Branch office can handle customer inquiries, manage bookings, and provide logistical support for cargo shipments.
Beyond the Permitted
Although certain activities have a lot of potential, it’s important to remember that there are some limitations. For example, branch offices are generally prohibited from retail trading and manufacturing (except within designated Special Economic Zones). Additionally, both approvals and operations are governed by the Reserve Bank of India (RBI) regulations, so it’s essential to exercise caution and careful consideration.
Making your Move
Setting up a branch office in India can be profitable but requires meticulous planning and expert advice. A thorough understanding of regulations, tax implications, and operational challenges is crucial for a seamless and successful transition. Before making your final decision, it is advisable to consider other entity options, such as Liaison Offices and Project Offices. For a fully-fledged operation in India that is on par with any domestic company in India, we recommend establishing a wholly-owned subsidiary company in India.
Conclusion
This article comprehensively explains the permitted activities for a foreign company’s branch office in India. The Foreign Exchange Management (Establishment in India of a Branch Office, Liaison Office, Project Office, or any other Place of Business) Regulations, 2016, and The Master Direction (RBI/FED/2015-16/6, FED Master Direction No.10/2015-16) issued by the Reserve Bank of India, prescribe the list of permitted activities for a Branch Office. The article highlights the approved activities, such as export/import of goods, professional and consultancy services, research and development, fostering collaborations, representing the parent company, IT and software development, technical support, and foreign airlines/shipping companies. The article also emphasises the limitations and regulations that govern branch offices and offers guidance on making informed decisions to ensure a smooth and successful transition
