Setting up Branch of Foreign Company in India-Delhi|Gurgaon|Noida|Mumbai

Setting up a Branch office of Foreign Company in India

About us

We are the Group of Professionals compromising Chartered Accountants, Company Secretary and other professional Consultants providing Corporate law services, Company Registration and Incorporation Services in India. Our Team helps Foreign Company or entities to setup there business in India. We are specialise in opening and registering the Wholly owned Subsidiary, Liaison office, Branch office or Joint Venture in India. We can helps the foreign company to setup their Wholly owned subsidiary or any Indian Venture in almost every metro city in India. We have our offices in Noida, Gurgaon, New Delhi, Mumbai.

What is Branch office of foreign company

Foreign Company can open branch office in India due to several reasons:

Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to set up Branch Offices in India with specific approval of the Reserve Bank. Such Branch Offices are permitted to represent the parent / group companies and undertake the following activities in India:

i. Export / Import of goods.
ii. Rendering professional or consultancy services.
iii. Carrying out research work, in areas in which the parent company is engaged.
iv. Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
v. Representing the parent company in India and acting as buying / selling agent in India.
vi. Rendering services in information technology and devel¬opment of software in India.
vii. Rendering technical support to the products sup¬plied by parent/group companies.
viii. Foreign airline / shipping company.

Normally, the Branch Office should be engaged in the activity in which the parent company is engaged.

Note:
a.Retail trading activities of any nature is not allowed for a Branch Office in India.

b.A Branch Office is not allowed to carry out manufacturing or processing activities in India, directly or indirectly.

c. Profits earned by the Branch Offices are freely remittable from India, subject to payment of applicable taxes.

Registration Process for opening a Branch office in India

• Foreign company needs to submit its formal application to the Chief General Manager, Exchange Control Department (Foreign Investment Division), RBI Central Office, Mumbai in the form FNC-1.• These applications are considered on a case-to-case basis.• In addition to this, the foreign company is also required to obtain a Certificate of establishment of place of business in India from the Registrar of Companies (ROC).• The RBI generally gives permission in a time span of about 2 to 4 weeks. The application must include the following details:-
-Operating history of the company worldwide
-Proposed interests and activities in India
-Reasons for wanting to open a branch office and
-Any foreign exchange implications for such matters.The branch offices may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines. They need not retain any profits as reserves in India. But in certain cases, where income is deemed to have originated in India and such income includes royalties, fees for technical services, interest and capital gains including capital gains from share of capital in India, branch offices may repatriate profits to their Head Office without obtaining prior approval from RBI.

General Criteria for open a Branch office in India

The applications from such entities in Form FNC will be considered by the Reserve Bank under two routes:

• Reserve Bank Route – Where principal business of the foreign entity falls under sectors where 100 per cent Foreign Direct Investment (FDI) is permissible under the automatic route.

• Government Route – Where principal business of the foreign entity falls under the sectors where 100 per cent FDI is not permissible under the automatic route. Applications from entities falling under this category and those from Non – Government Organisations / Non – Profit Organisations / Government Bodies / Departments are considered by the Reserve Bank in consultation with the Ministry of Finance, Government of India.

The following additional criteria are also considered by the Reserve Bank while sanctioning Branch Offices of foreign entities:

• A profit making track record during the immediately preceding five financial years in the home country.

• Net Worth [total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name]not less than USD 100,000 or its equivalent.

Application for Setup a Branch office in India

The application for establishing Branch Office in India should be forwarded by the foreign entity through a designated AD Category – I bank to the Chief General Manager-in-Charge, Reserve Bank of India, Foreign Exchange Department, Foreign Investment Division, Central Office, Fort, Mumbai-400 001, along with the prescribed documents including:

• English version of the Certificate of Incorporation / Registration or Memorandum & Articles of Association attested by Indian Embassy / Notary Public in the Country of Registration.

• Latest Audited Balance Sheet of the applicant entity.

• Other details like the profile of the applicant, nature and location of activities and source of funds etc.

• A KYC of the parent Company in a prescribed format

• Besides the above, certain Authorized Dealers may ask for certain information or documents or certifications to convince themselves of the credibility of the applicant.

Information to be filed with Registrar of Companies, Delhi.

• Form FC-1
• 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;
• The full address of the office of the company in India which is deemed to be its principal place of business in India;
• List of directors and secretary of the foreign company.
• Reserve bank of India approval letter.
• Power of Attorney for Authorised Representative in India.

Reporting with the Directorate General of Police

In September 2012, RBI came out with a new circular which enlarged the reporting requirement for a Branch Office. The Circular mandated that:
• A Branch Office shall submit a report containing information in a prescribed form within five working days of the Liaison Office becoming functional to the Director General of Police (DGP) of the state concerned in which Branch Office/LO/PO has established its office; if there are more than one office of such a foreign entity, in such cases to each of the DGP concerned of the state where it has established office in India;
• A copy of the report as per Annex shall also be filed with the DGP concerned on annual basis along with a copy of the Annual Activity Certificate/Annual report required to be submitted by the Branch Office concerned, as the case may be.
• A copy of report thus filed as above shall also be filed with AD by the Branch Office concerned.

Annual Compliances for Branch office in India

• File Annual Activity Certificates from the Auditors to be submitted to the RBI, The DGP and the Directorate of Income Tax within 6 months i.e 30th September of the Balance Sheet date, i.e 31st March.

• Audited Financial Statements including Receipts and Payments A/C shall be filed with the Directorate of Income Tax.

• Annual Compliances and Filing with the Registrar of Companies