A Foreign Company / Corporation can establish a branch office in India by obtaining prior approval of the reserve bank of India and after that registering a company with the Registrar of Companies. There are various methods by way of which a foreign company can enter Indian economy, and the decision of a particular format depends on the business objective and the purpose for which the foreign company or corporation is coming into India.
If the purpose is to study Indian Market, potential, or to spread awareness of the product or services, then the best choice would be to form a liaison or representative office of the foreign company. However in case, the objective is to book orders, but the delivery of goods or services shall be the responsibility of the head office, a branch office of the foreign company is a good choice.
A branch office or a liaison office is a foreign company for tax laws and Indian government taxes the profits of such entities at higher rates. As of now the tax on the profit of the foreign company is 40% in contrast to the tax rate of 30% on Indian company.
HOW WE CAN HELP YOU TO START
- We will help you complete all the documentation requirements
- We will file the documents with RBI & follow-up
- We will work for issuance of Permission to open a branch office.
- We will complete the registration with Registrar of Companies
- We will complete the registration with local Police
- We will help on the compliance requirements to commence work
- Certificate of Incorporation / Charter issued to the foreign company by government & its MOA/ Rules
- A declaration that the parent company shall meet any shortfall in meeting expenses of branch office
- Five years historical Financial Statement of the parent company duly attested by its auditors
- A certificate from the auditors of the parent company that the net worth of the parent co is more than $ 1,00,000
- The identity and address proof of the responsible person to do compliance for the branch office.
- Premises proof of the registered office of branch office and an NOC from the owner of such premises
- In case the document is in the foreign language, then a certified translation thereof must be filed.
PROCESS OF REGISTRATION AND FOLLOW-THROUGH
- Attestation or Legalisation of Documents
All documents which are required to be filed with RBI of the foreign company like their certificate of incorporation, board resolutions, the moa and articles of the foreign company and the documents of the authorised signatory of the foreign company need to be legalised either through Indian Embassy or to be apostilled as per Hague convention.
- Filing of Application with RBI through AD Bank
The application for registration of a branch office of a foreign company is filed in FNC to the reserve bank of India through AD Bank (Authorised Dealer). The AD Bank plays a crucial role as all the communication to the RBI has to be routed through them. We have excellent relationship with many banks in India, which certainly help in applying to the RBI and Followup
- Verification of KYC from Banker of Parent Company
After FNC Form is filed with the AD Bank, a request for verification of documents is sent to the banker of the foreign company. This process is also known as swift based verification. After receipt of confirmation of the documents from the foreign banker, the application is submitted to the RBI for their approval. The RBI may seek clarification or any additional document which need to be submitted.
- Approval of RBI for Branch Office Registration in India
If the business activity to be undertaken qualifies for 100% FDI then RBI is the approving authority, and in all other cases, RBI decides with consultation with the relevant ministry of the central government. The decision of RBI is on the case to case basis, and there is no standard rule which applies in all cases. After approval RBI allots a unique number to the branch office known as UIN. Usually, RBI decides within 2-4 months subject to its assessment being satisfactory.
- Registration of Foreign Company Branch with the ROC
After approval of the RBI for the establishment of the branch office in India, an application for registration of branch office of the foreign company is filed within 30 days of such approval. In case there are Indian directors the DIN number of such director is needed, and the digital signature of the authorised signatory is required to e-file statutory forms with the ROC for their approval.
- PAN Card, Tax Deduction Number & Bank A/c Opening
Income Tax Department allots a unique 10 Digit alphanumeric number as a permanent account number, also known as PAN Number. To comply with TDS provisions, every taxpayer needs to obtain a Tax Deduction Account Number. These identification numbers are essential to do compliance with the tax rules. The bank account of the branch office can be opened after allotment of Pan Number by the Income Tax Department.
- Other Registration and Licenses
After the branch office is operational, there are various other compliance related activities, which depends on the nature of the business and the state-specific laws, which apply to all entities doing commercial activities. For example registration under shops and establishment act, Goods and Services Tax (GST), Professional Tax Act, Provident Funds Act, Employee State Insurance Act (ESIC), etc.
POINTS TO NOTE
- Name & New Office
The name must be same to that of the foreign parent company, and for each new office of such branch office, a fresh approval is required from RBI with justification
Net Worth Requirement
The foreign parent company must have a profitable track record of five years in a row & the net worth must be more than $ 1,00,000/- attested by their auditors
- Taxation in India
The income tax on the profits of the branch office of foreign entities in India is 40% plus surcharges as applicable. GST is applicable on supply of goods or services
- Profit Remittance Allowed
The profits of the branch office are freely allowed to be remitted from India to its parent company after payment of applicable taxes, after the audit if books of A/c