Liaison Office Registration
Introduction to Liaison Office Registration
Foreign companies who want to establish their business operation in India must start a Liaison office. The aim of setting up a Liaison office is to discover the possible outcomes of business opportunities a company can receive in India by gathering all the necessary business information. Liaison office is the popular option for investors who want to explore & understand the business environment of India. The type of entity is beneficial for promoting the parent company & acts as the communication channel between the Indian and foreign companies.
The Liaison office was established with the aim of working as a bridge because it imports and exports from/to India, conducting market research, delivering feedback, and promoting technical & financial participation of foreign companies. Foreign investors love the opportunities the Liaison office delivers. Through this, foreign investors can limit their legal, financial, and administrative responsibilities.
The activities permitted by the Liaison office
- Signify the foreign parent company in India
- It helps to form a technical & financial collaboration between Overseas and Indian company
- Advertising Export/import partnerships between countries
- Set up strong communication between foreign companies and Indian parties with the aim of developing marketing potential.
We all know that India is rapidly progressing and growing globally economically. There are multiple foreign companies who want to invest in the Indian market. This is the reason why foreign companies love to establish their Liaison office in India. This complete process can be turned into an easy and hassle-free way when you have experts who help you in the complete procedure.
The Eligibility Criteria for Registering the Liaison Office in Delhi India
The Liaison office can be established after obtaining permission from the RBI under the provision of FEMA (Foreign Exchange Management Regulation), 1999. Here, we have mentioned the following requirements for opening a Liaison office in India-
- Anyone who is not a resident of India but wants to set up a Liaison office in India requires approval from the Bank Of India.
- A minimum net worth of 50,000 USD is required to verify the most recently audited balance sheet.
- 3-year records for being a profitable operation preceding the three financial years in your home country.
- For financial companies, there is no need to get approval from the RBI, in case the business has received the required approval under the Act of Banking Regulation in 1949.
In case a business doesn’t meet the following requirement, but the subsidiary company does, the parent business can present the letter of comfort on behalf of the subsidiaries.
Documents needed For the Registration of Liaison Office in India
An essential document for registering a liaison office in India is Form FNC-1, which consists of a number of letters, resolutions, and certifications.
- The parent company's letter of authority supporting the local representative is an essential part. By doing this, the figure employer presents the local consultant the authority to act on its behalf whilst the liaison office is being hooked up and run.
- A letter to the Reserve Bank of India (RBI) written by the parent company's principal officer is attached to the form. The parent company intends to open a liaison office in India, as stated in this letter.
- A letter of authority or resolution from the parent company offering official consent for establishing the liaison office in India is also enclosed.
- A comfort letter from the parent company confirming support for the liaison office's operations in India is required by the form.
- A board resolution is required in order to guarantee legal and operational clarity, allowing employees of the parent company to sign documents and submit applications to RBI. The local representative may receive further authority over this resolution by means of a notarized Power of Attorney.
- Financial records are required, including the most recent audited balance sheet and the parent company's annual accounts for the previous five years. The administrators of the parent business enterprise and the Indian Consulate need to translate, notarize, and certify those files.
- Records pertaining to the legal status of the parent company are essential. This contains two copies of the Memorandum and Articles of Association in English, duly attested by the Indian embassy or a notary public in the country of registration.
- Additionally, the Indian Consulate must translate, properly notarize and certify the Certificate of Incorporation.
- It is necessary to provide the bank account number and information about the parent company's domestic bankers.
- It is necessary to have details about the authorized person in the home country, such as name, address, email address, and phone number.
- The form should specify the expected level of funding for operations in India.
- It is necessary to provide a brief summary of the applicant organization's domestic operations, including its goods and services.
- The applying organization must pledge to be transparent in response to requests from its banker for reports or views made by the RBI or the Government of India.
- Information about people or businesses that own more than 10% of the applicant company's equity is required.
- Information about the planned local office, the number of workers, the number of foreign workers, and, if chosen, the address of the local office head are required.
- It is required that the applicant company provide a banker's certificate attesting to its financial standing.
- Verification of the applicant company's due diligence and the background information of its promoters is crucial.
- It is necessary to describe the organizational structure in terms of shareholding patterns.
- Signed bank account opening form from an Indian bank is required.
- It is necessary for all directors to provide identification and proof of address, attested to by the banker and consulate in their home nation.
- The form includes a resolution for opening a bank account with the assigned banker.
- It is necessary to have an additional certificate from a certified public accountant (CPA) attesting to the profit made in the home country during the previous three fiscal years.
- It is necessary to obtain full KYC (Know Your Customer) information from shareholders who own more than 10% of the applicant company.
- The form's declaration section lists the applicant's promises, which include using a designated account for transactions, notifying the bank of any property acquisitions, reporting senior management changes, and making sure term deposits are used properly.
Benefits of Setting Up A Liaison Office in India
For companies aiming to increase their footprint abroad, putting in place a liaison workplace has diverse advantages.
- First and foremost, the Liaison Office acts as an essential conduit for communication between the main office and the overseas head office. This makes it less difficult to communicate in a timely and green manner, which helps the enterprise advantage marketplace opportunities as they present themselves in the host country.
- A liaison office is relatively simple to set up and close, making it easy to enter and exit foreign markets. It isn't always necessary to buy fixed property inside the call of the Liaison Office within the host country, not like whilst developing a corporate structure. This adaptability gives groups a short and low-cost manner to build a neighborhood presence.
- Liaison Offices are appealing because they are not required to pay taxes under the Income Tax Act of 1961 due to their non-operational nature. Financial advantages result from this tax exemption, which frees agencies to strategically install assets without disturbing them about collecting extra tax responsibilities.
- Liaison Offices allow businesses to take advantage of emerging market opportunities without having to deal with the hassles of establishing a corporate structure. This minimizes the time and assets wished for established order and allows for short market entry and responsiveness to transferring commercial enterprise environments.
The exemption from most requirements of the Companies Act 2013, with the exception of obtaining an Annual Activity Certificate, is one noteworthy benefit. Liaison Offices' overall cost of compliance is greatly decreased by this exemption. By eliminating the extensive legal and regulatory obligations that usually go together with company structures, corporations can give attention to their core commercial enterprise operations, even cutting down on working prices.
Drawbacks of Setting Up A Liaison Office in Delhi India
There are several drawbacks to opening a liaison office.
- First off, a Liaison Office cannot carry out any business operations, in contrast to a Branch Office. Its function is limited to enabling correspondence between the overseas headquarters and the main office; it is not authorized to carry out business operations.
- The list contained in Schedule II of Notification No. FEMA 22/2000-RB limits the actions of a liaison office. Any departure from this list necessitates prior Reserve Bank approval, which increases regulatory scrutiny and might reduce the Liaison Office's flexibility in carrying out a range of business activities. These limitations could limit the operational flexibility and scope of businesses that choose to use a Liaison Office structure.
Compliance for a Liaison Office in Delhi India
Every 12 months, the liaison office wishes to verify that its operations are in step with its constitution via filing an Annual Activity Certificate (AAC) to the Reserve Bank of India (RBI). This certificate attests to the office's adherence to regulatory necessities and was created by way of a chartered accountant. In addition, an AAC needs to be submitted to the Directorate General of Income Tax no later than sixty days following the end of the fiscal year.
A Liaison Office must obtain prior RBI approval through its Authorized Dealer (AD) Category-I bank in order to open multiple bank accounts in India. The additional account must be justified in the application, and approval is subject to fulfilling regulatory requirements. This strict framework for compliance guarantees openness, responsibility, and conformity to the rules that govern Liaison Offices in India.
General F.A.Q.
No, The Liaison Office and Branch Office are two separate entities, the branch office is part of head office situated at different location carrying out the business of Head Office, where as Liaison Office is merely a medium of communication between the head office and the other business units situated at a location.
'Liaison Office' means a place of business to act as a channel of communication between the principal place of business or 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 remittances received from abroad through normal banking channel.
Any person who is resident outside India, can establish the liaison office in India only after the prior approval of Reserve Bank of India.
For Banking Companies, no such approval from Reserve Bank of India is required, if such company has obtained necessary approval under the Provision of the Banking Regulations Act, 1949.
NOTE - No person, being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, or China, without prior permission of the Reserve Bank, shall establish in India, a branch or a liaison office or a project office or any other place of business by whatever name called.
Following is the list of documents required for opening of Liaison Office:
- Form FNC – 1 – Three copies
- Letter from the principal officer of the Parent company to RBI.
- Letter of authority from the parent company in favor of Local Representative.
- Letter of authority/ Resolution from parent company for setting up liaison office in India.
- Board Resolution authorizing the personnel (from the company) to execute document and apply to RBI or further delegate by way of a Power of attorney to local representative (duly notarized). The POA to have the identification document of the person authorized.
- Comfort letter from the parent company intending to support the operation in India.
- Two copies of the English version of the Certificate of Incorporation, Memorandum & Articles of association (Charter Document) of the parent company duly attested by the Indian embassy or notary public in the country of registration.
- Certification of Incorporation - Translated & Duly Notarized and Certified by Indian Consulate
- The Latest audited Balance sheet and annual accounts of parent company duly Translated notarized for past Five Years. & Certified by Indian Consulate & Directors
- Name, Address, email ID and telephone number of the authorized person in Home Country.
- Details of Bankers of the Organization the Country of Origin along with the bank account number
- Commitment from the Organization to the effect that it will be open to report / opinion sought from its banker by the Government of India / Reserve Bank of India
- Expected funding level for operations in India.
- Details Relating to address of the proposed local office, number of persons likely to be employed, number of Foreigners among such employees and address of the head of the Local office, if decided
- Details of Activity carried out in Home Country by the applicant organization in brief about the product and services of company in Brief.
- Business confirmation regarding carrying out due diligence of applicant company and background of promoters of the applicant company
- Bankers Certificate
- Latest Proof of identity of all the Directors - Certified by Consulate and Banker in Home Country
- Latest Proof of address all of Directors - Certified by Consulate and Banker in Home Country
- Details of the Individuals / Company holding more 10% of Equity
- Structure of the Organization w.r.t Shareholding pattern
- Complete KYC of Shareholders holding more than 10% Equity in the Applicant Company
- Resolution for Opening up Bank Account with the Banker
- Duly Signed Bank Account Opening Form for Indian Bank
- Separate Certificate from CPA for certification of profit in home country for preceding 3 financial years
- "Declaration from the customers on the below line:-
- We would operate all transactions only through the designated account held with branch of the bank.
- We would inform bank on the acquisition of immovable property or premises for conducti ng business. If under lease arrangement the same would be limited to maximum of 5 years
- We would inti mate any changes in senior management such as CEO/MD/CMD etc within a week of such appointments along with their incoming personnel’s KYC documents
- Any term deposits booked by us will be from temporary surplus funds and will be for a tenor NOT exceeding 6 months from the date of booking. The complete maturity proceeds would be deployed for the business in India within 3 months from maturity.
- Undertaking to pay Bank charges (this will be subject to internal approvals)"
As per Notification No. FEMA 22/2000-RB dated 3rd May 2000 Schedule II
Permitted activities for a Liaison Office in India of a person resident outside India:
- Representing in India the parent company/group companies.
- Promoting export import from/to India.
- Promoting technical/financial collaborations between parent/group companies and companies in India.
- Acting as a communication channel between the parent company and Indian companies.
Apart from the list mentioned above Liaison Office is not permitted to carry on or undertake any other activities unless permitted by the RBI.
The Liaison Office is merely a medium of communication between the place of business and the head office. And is prohibited to undertake any activity to earn income on its own.
All the internal expenses of the Liaison Office are met with inward remittances received from the head office situated outside the country.
Only applicants from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong, Kong, Macau, and Pakistan 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. All other countries are exempted from registering with the State Police authorities.
The Liaison Office does not earn any income in India and therefore no tax liability falls upon Liaison Office.
The Annual Activity Certificate (AAC) as at the end of March 31 each year along with the required documents needs to be submitted by the following:
In case of a sole Liaison Office, by the Liaison Office concerned.
In case of multiple Liaison Office, a combined AAC in respect of all the offices in India by the nodal office of the Liaison Office
The Liaison Office needs to submit the AAC to the designated AD Category -I bank as well as the Director-General of Income Tax (International Taxation), New Delhi whereas the PO needs to submit the AAC only to the designated AD Category -I bank.
ii. The designated AD Category - I bank shall scrutinize the AACs and ensure that the activities undertaken by the Liaison Office are being carried out in accordance with the terms and conditions of the approval given. In the event of any adverse findings reported by the auditor or noticed by the designated AD Category -I bank, the same should immediately be reported to the General Manager, Reserve Bank of India, CO Cell, New Delhi, along with a copy of the AAC and their comments thereon
Once the approval from Reserve Bank is obtained, it remains valid for 3 years and thereafter it expires which can be renewed if needed.
At the time of winding up of Branch/Liaison offices the company has to approach the designated AD Category - I bank with the following documents
Copy of the Reserve Bank's permission/ approval from the sectoral regulator(s) for establishing the BO / LO.
Auditor’s certificate- i) indicating the manner in which the remittable amount has been arrived at and supported by a statement of assets and liabilities of the applicant, and indicating the manner of disposal of assets; ii) confirming that all liabilities in India including arrears of gratuity and other benefits to employees, etc., of the Office have been either fully met or adequately provided for; and iii) confirming that no income accruing from sources outside India (including proceeds of exports) has remained un-repatriated to India.
Confirmation from the applicant/parent company that no legal proceedings in any Court in India are pending and there is no legal impediment to the remittance.
A report from the Registrar of Companies regarding compliance with the provisions of the Companies Act, 2013, in case of winding up of the Office in India.
Any other document/s, specified by the Reserve Bank while granting approval. The designated AD Category - I banks has to ensure that the BO / LOs had filed their respective Annual Activity Certificates with the Reserve Bank for the previous years, in respect of the existing Branch/Liaison Offices. Confirmation about the same can be obtained from the Central Office of the Reserve Bank in the case of BOs and from the Regional Office concerned in the case of LOs.
W.r.t the application made by a BO/LO for making remittance of its winding up proceeds, the designated AD Category - I bank may permit the remittance subject to the directions issued by the Reserve Bank in this regard from time to time and payment of applicable taxes in India, if any.
Closure of such BO / LO has to be reported by the designated AD Category - I bank to the Reserve Bank (the Regional Office concerned for LOs and Central Office for BOs), along with a declaration stating that all the necessary documents submitted by the BO / LO have been scrutinized and found to be in order. If the documents are not found in order or cases are not covered under delegated powers, the AD Category - I bank may forward the application to the Reserve Bank, with their observations, for necessary action. All the documents relating to the BO / LO operations may be retained by the AD Category - I bank for verification by the internal auditors of the AD / inspecting officers of the Reserve Bank.
Yes, The PAN/TAN number is allotted to Liaison Office.
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