India is a Land of opportunist’s and the Neighbour country and its resident’s have ample scope of business and churning profits out of Indian Economy which is outshining the West Economy on the basis of its fast pace of growth and rich diversification and strong government and Easy entry policy for Neighbour country’s.
So first questions knocks in mind is How to start business in India?
What it takes to start the business in India?
What are the compliance’s for starting business in India and running the same?
No need to worry about the same and we will unveil the guides for how to start business in India if you are a foreign entity!!
A body corporate incorporated outside India (including a firm or other association of individuals), desirous of opening a Liaison Office (LO) / Branch Office (BO) in India have to obtain permission from the Reserve Bank under provisions of FEMA 1999. The applications from such entities in Form FNC (Annex-1) will be considered by 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 Liaison/Branch Offices of foreign entities:
For Branch Office — a profit making track record during the immediately preceding five financial years in the home country.
For Liaison Office — a profit making track record during the immediately preceding three 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].
- For Branch Office — not less than USD 100,000 or its equivalent.
- For Liaison Office — not less than USD 50,000 or its equivalent.
Why foreign entities choose India as Branch Office or Liaison office destination and reasons for the same are listed below :-
- Foreign companies, including USA companies, European companies or other country companies , are allowed to set up Branch Offices in India for the following purposes:
- Export/Import of goods
- Rendering professional or consultancy services
- Carrying out research work, in which the parent company is engaged.
- Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
- Representing the parent company in India and acting as buying/selling agents in India.
- Rendering services in Information Technology and development of software in India.
- Rendering technical support to the products supplied by the parent/ group companies.
- Foreign airline/shipping company
- Foreign Banks
- A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer. Branch Offices established with the approval of RBI, may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines Permission for setting up branch offices is granted by the Reserve Bank of India (RBI)
What are the Reporting Requirements after opening Branch Office in India by a Foreign entity?
(i) All new entities setting up Project Offices shall submit a report containing information, as per format provided in Annex 3 within five working days of the PO becoming functional to the Director General of Police (DGP) of the state concerned in which PO has established its office; if there is 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;
(ii) The foreign company establishing a Project Office in India is to furnish report through the concerned AD branch, to the concerned Regional Office of Reserve Bank of India under whose jurisdiction the Project Office is set up, incorporating the following details.
- Name and address of the Foreign Company,
- Reference Number and date of letter awarding the contract referred to in clause (ii) of Regulation 5
- Particulars of the authority awarding the projects / contract,
- The total amount of contract,
- Address / e-mail address / telephone number / fax number of the Project Office,
- Tenure of Project Office,
- Brief details of the Project undertaken,
- AD branch with whom the account has been opened and the foreign currency in which the account is opened,
- An undertaking to the effect that the Project Office is eligible to avail of the General Permission under Regulation 5(ii)FEMA 95 dated July 2, 2003 showing the reason thereof.
This Report shall be forwarded through the AD branch to the Regional Office concerned of the Reserve Bank of India within 2 months of establishment of the Project Office.
(iii) The Project Office shall also submit to the AD branch on an annual basis, a Certificate from a Chartered Accountant showing the Project Status and certifying that the accounts of the Project Office has been audited and the activities undertaken are in conformity with the General / Specific permission given by the Reserve Bank.
Branch office opening in India startup scratch firstname.lastname@example.org
What kind of regular compliance’s needed to be done by branch office’s in India after it is being setup in India ?
Maintenance of Books of Account
- Getting Annual Accounts audited
- Filling of Annual Activity Certificate with RBI
- Filling of Annual Return and Balance sheet with Registrar of Companies
- Intimating any change in constitution of Foreign Company to RBI & ROC
- Intimating any change in Directors of Foreign Company to RBI & ROC
- Intimating each and every change in the BRANCH office to RBI & ROC
- No additional place of business can be started unless approval is taken from RBI.
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