A Liaison Office (LO) serves as a representative office formed specifically for exploring and understanding the business and investment climate. A Liaison Office (also known as the Representative Office) can only undertake liaison activities, i.e. act as a channel of communication between the Head Office abroad and Indian Parties. Therefore, the task of these offices is limited to gathering information about potential business opportunities, supply source, providing information about the parent company and its products to prospective Indian customers or vice versa to its supplier. Expenditures incurred for such offices shall be paid entirely by inward remittances from the head office outside India.
Features of Liaison office
a. The name of the Indian liaison office shall be similar to the parent organization.
b. AD Banker / Reserve Bank of India is the governing body for the Liaison Office.
c. The Liaison office has no ownership, it is merely an extension of the existing foreign company.
d. All the expenses of the liaison office shall be covered by the head office, therefore the funds shall only be received from the head office account.
e. The Liaison Office License is issued for three years and can be extended every 3 years.
f. The liaison office is not subject to taxes in India, as the income tax department does not have a mechanism to review and assess if the activities it undertakes result in any taxable income in India
g. Liaison offices are allowed to open current INR accounts in India that are not bearing interest. To open the accounts, these offices are expected to contact their Authorized Dealers.
Following Activities In India: A Liaison Office Can Undertake:
The foreign parent company must have a three-year profitable track record in a row & its net worth of more than $50,000 as per auditors’ statement
PROCEDURE FOR SETTING
Any foreign company which intends to set up a liaison office in India is required to obtain prior approval from Reserve Bank of India (RBI), which may take up to 3-4 weeks to process the application. Approval is usually issued for 3 years and can be extended upon its expiry. A corporate body incorporated outside India (including a corporation or other individual association) wishing to open a Liaison Office (LO) shall obtain such permission by submitting an application in Form FNC to the Authorized Banker (AD) in India.
Following attachment must be attached with the form:
If the LO applicant is a non-governmental/non-profit organization engaged in any of the activities under the 2010 Foreign Contribution (Regulation) Act (FCRA), they will need to obtain an FCRA registration certificate instead of seeking FEMA permission.
Once approved by RBI, a Unique Identification Number (UIN) shall be allocated to the Liaison office. Each RBI-registered liaison office shall be registered as a corporate entity with the Ministry of Corporate Affairs (MCA). It is registration as Liaison office is in itself a foreign company established in India. The MCA will then assign Corporate Identity Number (CIN) to these companies. The MCA will then assign Corporate Identity Number (CIN) to these companies. Once MCA allocates the CIN, then Revenue Authority requires the LO to obtain the Permanent Account Number (PAN) & Tax Deduction Number (TAN).
After proper scrutiny, AD bank shall forward the application to RBI for approval along with its comments/recommendations. RBI will accept the applications under two routes:
Automatic route – Where the foreign entity's main business falls within sectors were under the automatic route 100 percent FDI is permissible.
Approval route – Where the foreign entity's main business falls within sectors were under the automatic route 100 percent FDI is not allowable. In consultation with the Ministry of Finance, Government of India, the RBI may accept applications from organizations falling under this category and those from non-governmental organizations.
a. 2 Copies of the Incorporation / Registration Certificate (notarized and certified by the Indian Embassy) (one copy each for RBI & ROC); If it is in a language other than English then it is required to translate the same notarized and certified by the Indian Embassy.
b. 2 Copies of the Memorandum & Articles of Association (English Translation) certified by the Embassy of India
c. Details of Last Three Years Import / Export from India (Signed by letterhead, five copies)
d. Latest 3 years Audited Balance Sheet (English translation) accredited by the Embassy of India
e. Existing arrangements, eg direct/indirect agent, if any in India
f. Details on the activities to be carried out in India
g. Product details/services to be rendered by the parent company in India. Often, if any, have any literature on the business such as brochures/product catalogs and literature. Indian regulators (RBI) love this literature and help to complete the cycle quickly
h. With a signature that we will give to you, some other forms, documentation that be needed.
i. Activities to be conducted with a branch office in India.
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