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Liaison Office Registration
A Liaison Office (LO) functions as a place in India for the prospective companies, foreign companies and investors who want to set up their business in India. It helps a foreign company mainly to understand and explore the general business environment, market research for the products of the parent company and to provide and seek information from potential customers or vendors. A liaison office represents.
- the parent company/group companies,
- promoting export/import from/to India,
- promoting technical/financial associations between parent/group companies and companies in India and
- to Act as a communication channel between the parent company and Indian companies.
Please note that a liaison office of the foreign company cannot engage itself into any kind of commercial activities. Further, the parent company will meet all the expenses of the liaison office. A liaison office is a foreign company and Indian government taxes the profits of such entities when it carries out the transactions which amount to commercial activities through a permanent establishment (PE) at higher rates.
The tax on the profit of the foreign company is 40% in comparison to the tax rate @ 22% on Indian company.
Purpose of Establishing Liaison Office in India
Following are the major reasons of establishing liaison Office in India.
- To signify the Parent Company in India,
- As India is one of the fastest growing economies in the world, Liaison office helps the parent company to explore various opportunities in India
- A parent company is able to gather contacts and conduct market research in India,
- Liaison Office helps in promoting the export / import of goods and services from/ to India.
- Liaison offices can hire local and foreign staff, rent property and open bank accounts in India at a very cheaper price
Reserve Bank of India (RBI) will consider the following eligibility criteria before a foreign/parent company plans to set up a Liaison Office in India:
- Only a foreign company or a body corporate incorporated outside India (including a firm or other association of individuals) can set up a Liaison Office in India
- Following must require prior approval of RBI before opening a Liaison Office:
- In case the individual or entity belongs or is registered in Pakistan
- In case the applicant is from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau and wants to open Liaison office in Jammu and Kashmir, North East region and Andaman and Nicobar Islands;
- In case, the principal business of the applicant falls in the four sectors namely Defence, Telecom, Private Security and Information and Broadcasting.
- If the applicant is a Non-Government Organisation (NGO), Non-Profit Organisation, Body/ Agency/ Department of a foreign government. However, if such entity is engaged, partly or wholly, in any of the activities covered under Foreign Contribution (Regulation) Act, 2010 (FCRA), they shall obtain a certificate of registration under the said Act and shall not seek permission under FEMA.
- The applicant must have a financially sound track record which means the applicant must have a profit making track record during the immediately preceding three financial years in the home country and net worth of not less than USD 50,000 or its equivalent.
- An applicant that is not financially sound and is a subsidiary of another company may submit a Letter of Comfort (LOC) from its parent/ group company, subject to the condition that the parent/ group company satisfies the prescribed criteria for net worth and profit.
Following are the documents which are required to set up a Liaison Office in India:
- Documents from Parent Company
- Certificate of Incorporation / Registration Certificate of Foreign Company in English Language
- Duly filed Form FNC-1
- Memorandum of Association (MOA) and Articles of Association (AOA)
- List of Details in respect of Directors/Key Executives
- Details of shareholders of the applicant company
- Net worth certificate attested by Certified Public Accountant (CPA)
- Audited financial statement of the last three preceding years
- Banker’s Report from the applicant’s banker in the parent country
- Documents Required from the Authorised Signatory
- 5 Colour Photo
- 5 copies of Passport
- Business Visa Copy with Immigration Stamp of arrival
- 5 copies of National Identity Card
- Latest Address Proof (Bank Statement/ Electricity/ Water Bill/ Phone Bill)
- Board Resolution Appointing the Authorised Representative
- Power of Attorney in the name of Authorised Representative
Following procedure needs to be followed while applying for registration of Liaison Office:
- Application to RBI
An application in Form FNC needs to be submitted to the RBI through AD Category-1 Bank along with the required documents and LOC (if applicable). We, at Registration SEVA have a tremendous relationship with many banks in India, which certainly help in applying to the RBI and proper updates.
- Verification of application by AD Category-1 Bank
The AD Category-I bank shall after exercising due diligence in respect of the applicant’s background, and satisfying itself as regards adherence to the eligibility criteria for establishing Liaison Office, and compliance with the extant KYC norms may grant approval to the foreign entity for establishing Liaison Office in India. The AD Category-I banks may frame appropriate policy for dealing with these applications according to the FEMA Regulations and Directions.
The validity period of an LO is generally for three years, except in the case of Non-Banking Finance Companies (NBFCs) and those entities engaged in construction and development sectors, for whom the validity period is two years only.
- Forwarding application request by AD Category-1 Bank to RBI
Before issuing the approval letter to the applicant, the AD Category-I bank shall forward a copy of the Form FNC along with the details of the approval proposed to be granted by it to the Reserve Bank of India for allotment of Unique Identification Number (UIN) to the proposed Liaison Office. After receipt of the UIN from the Reserve Bank, the AD Category-I bank shall issue the approval letter to the non-resident entity for establishing LO in India. This is in order to enable the Reserve Bank to keep, maintain and upload up-to-date list of all foreign entities which have been granted permission for establishing LO in India, on its website.
- Information of approval to AD Category-1 Bank
An applicant that has received a permission for setting up of a LO shall inform the designated AD Category I bank as to the date on which the LO has been set up. The AD Category I bank in turn shall inform Reserve Bank accordingly. In case an approval granted by the AD bank has either been surrendered by the applicant or has expired without any LO being set up, the AD Category I bank shall inform RBI accordingly.
- Opening of Bank Account by LO
An LO have to approach the designated AD Category I Bank in India to open an account to receive remittances from its Head Office outside India. It may be noted that an LO shall not maintain more than one bank account at any given time without the prior permission of Reserve Bank of India.
- Registration with ROC and police authorities
Applicant need to apply to ROC to obtain “Certificate of Establishment of Place of Business in India” along with PAN and TAN.Further, Applicants from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau or Pakistan desirous of opening LO in India shall have to register with the state police authorities. Copy of approval letter for ‘persons’ from these countries shall be marked by the AD Category-I bank to the Ministry of Home Affairs, Internal Security Division-I, Government of India, New Delhi for necessary action and record.
Compliances for Liaison Office
- Reporting to RBI about address and others
The LO has to report its office address to the RBI within 6 months of approval. It also has to report RBI about its Permanent Account Number (PAN) and “Certificate of Establishment of Business Place in India” issued by the office of ROC.
- Annual Activity Certificate
The LO has to obtain Annual Activity Certificate from practicing Chartered Accountant and to file the same with the following;
- Authorized Dealer Bank
- Director General of Income Tax (International Taxation)
- Return with ROC
The LO is required to file the following:
- Annual receipt and payment statement,
- An assets and liabilities statement duly audited by practicing local Chartered Accountants to the office of Registrar of Companies (ROC);
- Latest consolidated financial statement of parent company (duly notarized and certified by Indian Embassy / Consulate office that has proper jurisdiction in the office location of the parent company).
If the language of the parent company is other than English, then this will have to be translated by a certified translator before starting the process of notarization and certification. Apart from the financials, LO must also provide the list of all place of business, along with a copy of approval obtained if any. ROC filing has to be done before 6 months from the date of closure of books of accounts of LO.
How we can help in getting registration?
Some of the greatest reasons to pick us are:
- Liaison Office Registration in Minimum fees
- Registration in minimum time
- No trouble of compliances as we completely take control of them.
- All your returns will be filed duly
- Our Expert will submit documents after in-depth scrutiny of documents
- Our legal representatives are available 24*7 to explain the whole process and clear any queries you may have.
01.What is a liaison office & Who can set-up a liaison office?
A foreign company before entering the Indian market may intend to conduct some preliminary research or representation before the potential customers or partners, for that limited purpose a foreign company normally establishes a representative office also known as a Liaison Office in India. Any person resident outside including a foreign company, group company, association of person can establish a liaison office in India.
02. What is an Authorized dealer (AD)?
An authorized dealer is nothing but an approved third party that is legally established to deal with certain type of operation after the approval from the RBI and the actual parent company.
03. Can Foreign Insurance Companies / Banks set up Liaison Office in India?
Foreign Insurance companies can establish Liaison Offices in India only after obtaining approval from the Insurance Regulatory and Development Authority (IRDA). Similarly, foreign banks can establish Liaison Offices in India only after obtaining approval from the Department of Banking Operations and Development (DBOD), Reserve Bank of India.
04. Can a Liaison Office operate in India for an unforeseeable time period?
Initial approval of a LO is granted by Reserve Bank of India for 3 years. Subsequent request for an extension is generally approved for next 3 years. Further extensions can again be applied, however approval by Reserve Bank of India (RBI), is granted on a case to case basis.
05. Do I need to submit hard copies of any documents?
There is a requirement to appoint an Authorized Representative of an LO. He/she can be a resident of India or US. An Authorized Representative can be changed at the will of the Board of Parent Company. The person however must have an Indian Permanent Account Number (PAN). PAN is a unique number, obtained by registering at Indian Income Tax.
06. Who approves the setting up of a liaison office?
The RBI is empowered to approve the establishment of a liaison office in India, under master direction dated January 01, 2016 for the establishment of a place of a foreign corporation the powers have been delegated to any AD Category 1 Banker.
07. How to set up a Liaison Office in India?
To set up a liaison office first check the eligibility of being financially sound in terms of the network not being less than USD 50,000 or its equivalent. Then call Registration SEVA representative to discuss documentation and stepwise process. That’s it, rest shall be taken care by the professionally qualified CA, CS and Advocates.
08. Can LO maintain more than one account in India?
No, if an LO wants to open more than one account it has to obtain prior permission of the Reserve Bank through its AD Category I bank justifying the reason for additional account.