Overview of Liaison Office Registration
A liaison office or a representative office works as a communication channel between the parent company settled abroad and their parties in India. Foreign companies take liaison office registration in India to explore and support business prospects in India.
Such an office acts as a communication bridge. It promotes import and export from/to India, promotion of technical and financial participation of foreign parents/group company, conducting market research, providing feedback, etc.
Foreign investors appreciate the opportunity that liaison offices offer. It allows international investors to investigate the Indian market and establish a fast-growing market while limiting their financial, legal, and administrative responsibilities.
Permitted Activities of Liaison Office in India;
As India is among rapidly growing and progressing economies globally, many multinational companies are willing to invest in the Indian market. Therefore, they are always looking forward to establishing their liaison office in India.
Important points to consider before registering Liaison office in India
- Net Worth Requirement
A parent company must have a beneficial track record of the past three years in a row, and they should own a net worth of more than $50,000 attested by their auditors.
- No Income Generating Activity
The parent company provides financial aid to all the operations of the liaison office since the liaison office is not allowed to earn any income in India.
- Name & New Additional Liaison Office
The name must be similar to that of the foreign parent company. In addition, a new approval is needed for each new liaison office from the Reserve Bank of India with complete justification.
- Taxation in India
Income tax authorities have the right to impose income tax on a liaison office.
Route of RBI Approval
Automatic route
In the automatic route, the proposed entity applicants do not require prior approval from RBI or the government of India. So these are the sectors where 100% FDI is allowed.
Also, such applicants belong to countries with whom India does not share land borders.
Approval Route
The approval route applies in the following circumstances;
1. The applicant company is headquartered at, or an applicant is a citizen of Pakistan, China, Sri Lanka, Iran, Afghanistan, Bangladesh, Hong Kong, or Macau, and the application is for opening a BO/LO/PO in Jammu and Kashmir, Andaman and Nicobar Islands; and North East region.
2. The principal business activity falls in the four sectors, namely Private Security, Telecom, Defence and Information, and Broadcasting.
3. The applicant is an NGO
List of Documents for Liaison Office Registration
Documents required from Parent Company
Documents required from the proposed authorized signatory
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Eligibility Criteria for Liaison Office Registration in India
Foreign Exchange Management Regulations, 2016 governs the establishment of a place of business for a foreign company. Therefore, it is important to fall under the criteria of the below-mentioned qualifications to set up a liaison office in India:
Drafting of Government Forms and Documents
On receiving the complete set of documents, the next step is to draft the following documents for the signature purpose by the applicant company and from the authorized signatory.
Liaison Office Registration Process in India
- Filling of Application with RBI through AD Bank
A foreign company's liaison office application is filed with the FNC. The application is submitted through AD Bank to the Reserve Bank of India (Authorised Dealer). The AD bank plays a crucial function since it is through them that all contact with the RBI is routed.
- Verification Of KYC From Banker Of Parent Company
A request for document examination is issued to the banker of the foreign firm. The process of sending requests for verification purposes is called swift-based verification.
Once the foreign lender has validated the documentation, the application is sent to the RBI for approval. The RBI may also request other documentation, depending on the circumstances.
- Approval of RBI for Liaison Office Registration in India
A particular policy is followed for approving the liaison office in India by the AD Banker. Priority is given to the cases where the automatic route is not available.
- Registration of Liaison Office with ROC
Once the company is formed, its bank account is opened, wherein the FDI should reach within 180 days of forming the company with an advance announcement to the banker.
- PAN Card, Tax Deduction Number, and Bank Account Opening
The income tax department of India issues a unique 10 digit number, known as PAN number. Once the PAN number is obtained, the liaison office is eligible to open its bank account. And every taxpayer must obtain a Tax Deduction Account Number to obey all the TDS norms.
- GST Registration & IEC
On obtaining Bank Account and cheque book, a copy of the check is needed to apply GST registration and Import Export Code.
Frequently Asked Questions
A liaison office is a representative office of a foreign-based parent company. The activities that a liaison office can undertake are working in business communication, promoting import and export from/to India, promoting technical and financial participation of foreign parents/group company, conducting market research, providing feedback, etc.
A Liaison office of a remote mother organization isn't treated as a different and unmistakable element in India. For all duty purposes, the Indian government charges the benefits of such elements at higher rates. The income tax for a remote organization is 40%.
Any individual resident of a foreign country, including a remote organization, group organization, association, or individual, can set up a liaison office in India.
- Pakistan
- Bangladesh
- Sri Lanka
- Afghanistan
- Iran
- China
- Hong Kong
- Macau
- Or any application for opening a branch office in Jammu & Kashmir, North-East Region, and Andaman and the Nicobar Islands.
The RBI is the concerned authority to approve the foundation of a liaison office in India.
To set up a liaison office, first, check the qualification of being monetarily solid in terms of the network not exactly USD 50,000 or its equivalent. At that point, call the Corpbiz agent to talk about documentation and stepwise procedure. Rest will be taken into consideration by the qualified CA, CS, and Advocates.
Foreign Exchange Management Regulations, 2016 governs the establishment of a place of business for a foreign company. Therefore, it is important to fall under the criteria of the below-mentioned qualifications to set up a liaison office in India:
- Income-generating activity is prohibited.
- The foreign head office must own net worth of above $50,000
- A beneficial track record of the past three years of the applicant company is required
A liaison office of a remote organization is permitted to do just restricted action in India, gave none of the exercises is profit-making action. As it were, a liaison office can do statistical surveying and representation action.
Every year, the branch office must document an Annual Activity Certificate (AAC), arranged by a chartered accountant, to the RBI confirming the workplace's exercises are within its sanction. LIKEWISE, an AAC ought to be recorded with the Directorate General of Income Tax within 60 days of the end of the fiscal year.
