Branch Office / Liaison Office / Project Office

Business entities registered outside India (Foreign Company) can establish business operations in India without creating and registering a subsidiary company. Subject to the RBI guidelines, a foreign company can open a Branch Office or Liaison Office in India. The scope of operations of such offices is typically limited to activities and functions such as country representative office, sourcing, technical and/or marketing support, import and export, etc.

Branch Office

Business entities incorporated outside India are allowed to set up Branch Offices in India with specific approval of the RBI. Such branch offices are permitted to represent the parent/group companies and undertake the following activities:

Export/import of goods;

Provide professional or consultancy services;

Undertake research work in areas in which the parent company is engaged;

Promote technical and/or financial collaboration between Indian companies and parent or overseas group companies;

Represent the parent company in India and act as the local buying/selling agent;

Render services in Information Technology (IT) and development;

Provide technical support to products supplied by parent/group companies;

Function as a foreign airline/shipping company.

Generally, branch offices should engage in the same activities as the parent company.

Important Notes

Retail trading activities of any nature cannot be undertaken by a branch office in India;

A branch office cannot carry out manufacturing or processing activities in India, directly or indirectly;

Profits earned by branch offices can be freely remitted from India, subject to the payment of applicable taxes.

Liaison Office

A Liaison Office (or Representative Office) can undertake only liaison activities, i.e. function as a channel of communication between the foreign company’s head office overseas and business/commercial parties in India.

Liaison offices cannot undertake any business activities and/or earn any income in India. Expenses of such offices should be met entirely through inward remittances of foreign exchange from the head office located outside India.

A liaison office can undertake the following activities in India:

Represent the parent company/group of companies in India;

Promote export/import from/to India;

Promote technical/financial collaboration between parent/group companies and Indian companies;

Act as a channel of communication between the parent company and Indian companies.

Project Office

The RBI grants general permission to foreign companies for setting up Project Offices in India, in instances where these companies secure contracts for executing projects in India from an Indian company. The following conditions should also be satisfied:

The project is funded directly by overseas inward remittances or funded by bilateral/multilateral international financing agencies;

The project has been cleared by the appropriate authority;

The Indian company or other business entity awarding the contract has received project finance by way of a term loan from an Indian public financial institution or bank.

Exceptions: If the above mentioned criteria are not satisfied, or the foreign company’s parent entity is incorporated in Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran or China; applications for setting up a project office should be forwarded to the Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai, for prior approval.

Branch Office – SEZ

RBI approvals are not required to establish a branch/unit in Special Economic Zones (SEZ) to carry out manufacturing and service activities, subject to the following conditions:

Such units are functioning in those sectors where 100% FDI is permitted;

Such units comply with part XI of the Companies Act (Sections 592 to 602); and

Such units function on a standalone basis.

Establishing a Branch/Liaison Office in India involves:

Seeking RBI approval through an Authorized Dealer of a Category I Bank; and
Registration of the branch/liaison office with the Registrar of Companies, New Delhi.