KLC & Co.|SETUP A LIAISON OFFICE IN INDIA

SETUP A LIAISON OFFICE IN INDIA

STEPS & DOCUMENTS REQUIRED

A Liaison Office is in the nature of a representative office set up primarily to explore and understand the business and investment climate. A Liaison Office is not permitted to undertake any commercial / trading / industrial activity, directly or indirectly, and is required to maintain itself out of inward remittances received from parent company through normal banking channels. Its role is limited to collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers. It can promote export/import from/to India and also facilitate technical/financial collaboration between parent company and companies in India. The Liaison Office is permitted to undertake following activities only:

  1. Representing the parent Company in India;
  2. Promoting export/ import from/ to India;
  3. Promoting technical / financial collaborations between the parent companies and companies in India

Acting as a communication channel between the parent company and Indian companies Any foreign company intending to open a Liaison Office in India is required to obtain prior approval from the RBI, the apex bank in India. Approval is usually granted for one to three years and can be renewed on expiry thereof.

Suitability of a Liaison Office The Liaison Office generally acts as a communication channel between the parent company overseas and its present or prospective customers in India. The Liaison Office can also be set up to establish business contacts or gather market intelligence to promote the products or services of the overseas parent company.The Liaison Office cannot undertake any business activity in India nor earn any income in India.

At the time of closure of the Liaison Office, RBI grants permission to repatriate the balance in the Indian bank account to the parent company. Since the Liaison Office is not permitted to earn any income, it should not constitute a taxable entity in India. However, the Liaison Office would be required to withhold tax from certain payments and hence is expected to comply with the requisite tax withholding obligations under the domestic tax law.

To open a Liaison office, the parent company has to apply to the Reserve Bank of India and is normally granted permission within 2 to 10 weeks.

Characteristics of a Liaison Office in India

  • It cannot carry out any commercial operations in India.
  • It must maintain a QA22C account with the bank. This is a special account that only allows inflows from abroad.
  • It can neither borrow, nor lend money
  • All expenses of the office must be met through inward remittances to the office from abroad (parent company) through the bank.
  • It is not subject to taxation in India

However, the office must file regular returns to the RBI. Such returns must include Audited Annual accounts and an activity report for the year.

The following documents/details are required for applying to RBI for setting up the Liaison Office in India:

  1. Proposed business activity in India;
  2. Name of Company with Certificate of Incorporation in home country (Attested from Home country i.e. notary + Apostile);
  3. Latest audited balance sheet (Attested from Home country i.e. notary + Apostile);
  4. Brief description of activities of Company;
  5. Value of Import/Export to India by the Company during last three years;
  6. Detail of existing arrangements in India, if any;
  7. Name and address of banker of the Company in the home country;
  8. Certified Copies of Memorandum and Articles of Association/By Laws/Regulations of the Company (Attested from Home country i.e. notary + Apostile and to be in English);
  9. List of directors and secretary of the Company i.e. name, address, designation, date of appointment etc;
  10. Registered office address of the Company including telephone no. and email id;
  11. The name and address or the names and addresses of one or more persons resident in India authorized to accept on behalf of the company service of process and any notices or other documents required to be served on the company;
  12. Full address of the office of the company in India which is deemed to be its principal place of business in India including telephone no. and email id;
  13. Particulars of opening and closing of a place of business in India on earlier occasion or occasions;
  14. Detail of other places of business in India, if any;
  15. List of shareholders containing name of shareholder, address, number of shares and value of shares;
  16. DSC of authorized representative of foreign company;
  17. Certified copy of PAN of authorized representative of foreign company or DIN if available;
  18. Particulars of subsidiary, holding or associate companies of the foreign company in India

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