Liaison office In India
Liaison office in India
What is a Liaison Office: Section 2(e) of Foreign Exchange Management (Establishment in India of branch or office or other place of Business) Regulations, 2000 define Liaison office as; a place of business to act as a channel of communication between the principal place of business of head office by whatever name called and entities in India but which does not undertake any commercial/trading/industrial activity, directly or indirectly, and maintains itself out of inward remittance from abroad through normal banking channel.
Who can open a liaison office in India: A Foreign Company with three years profit making record and with a net worth not less than USD 50,000/- can open a Liaison office in India.
What is the procedure to open a Liaison office in India: Any Foreign Company intending to open a Liaison office has to submit an application form in FNC along with the supporting documents to RBI through the Authorised Dealer (The Bank)
What are the documents required to be submitted to RBI for approval of Liaison Office in India:
- Copies of last three years Balance Sheet, profit & Loss account of the parent company
- Undertaking that the Liaison office in India will not carry out any commercial or trading activity in India.
- Company profile with brief history, product details and details of group companies etc.
- English version of the Certificate of Incorporation or registration, Memorandum and Article of Association.
- English version of the Board Resolution to open a Liaison office in India.
- Notarized Power Attorney in favour of local representative.
- Reason for opening a Liaison office in India
- Undertaking that the Liaison office will not carry out any commercial or trading activity in india.
Other Than Obtaining Approval from RBI, does a Liaison office in India need to do any other registrations as per the Indian Law:
After obtaining the approval from RBI to set up a Liaison office in India, they have to register with the register of companies by submitting form FC-1 along with the necessary documents
Is Liaison office liable to taxation in India:
The liaison office is not permitted to do any business or profit making activity in India. As per the definition in Foreign Exchange management (Establishment in India) a Liaison office can only act as a channel of communication between customers in India and its head office. However, the Liaison office has to obtain a PANCARD and every year the liaison office has to file an annual activity report to the Income Tax Authority in India.
The Liaison office in India also has to obtain a no objection/tax clearance certificate from the Income Tax Authority prior to closure of Liaison Office in India.
How does a Liaison office in India differ from a branch of foreign company.
Liaison office in India can Act only as an intermediary between customers in India and its head office abroad. Liaison office cannot do any activity with the objective to earn profit in India. However, a branch of foreign entity in India can do all commercial activity and its more or less like setting up of a company in India.
