Artices

India with the status of thriving economy & large consumer market continues to own large number of foreigners setting up the Company in India.

In previous article, as we discussed there are number of options available for a foreigner who is looking to setup business in India.

One of the option for foreign Company to expand their presence in India is by setting up of Branch office in India.

Foreigners looking to represent themselves & engaging in sale purchase of goods & services as in their parent country, can plan to setup Company as Branch office in India.

What is Branch office in India

Branch office is usually setup by the foreign companies who want to test the Indian waters. They are looking to expand the business in India & target the Indian consumers for their products & services.

However, they are trying to test the response of their products & service in India.

It is important to note that Reserve bank of India (RBI) maintain strict control on the branch office in India as compared to other company setups. Further, directors of their parent company shall be

solely responsible for activities of branch office in India

Eligibility requirements for setting up branch office in India

A Branch Office can setup office in India only if it’s parent Company in home country has the following track Record:

 A profit-making track record during the immediately preceding five financial years in the home country.

 Net Worth [total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name]- not less than USD 100,000 or its equivalent.

However, there is an exception for those who do not satisfy the eligibility criteria & are subsidiaries of other companies, Companies can submit a Letter of Comfort from their parent Company, subject to the condition that the parent company satisfies the eligibility criteria as prescribed above. AD Banker shall also ensure KYC of the Company before filing application to Reserve Bank.

Permissible activities of Branch office in India

Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to set up Branch Offices in India with specific approval of the Reserve Bank. Such Branch

Offices are permitted to represent the parent / group companies and undertake the following activities in India:

i. Export / Import of goods.

ii. Rendering professional or consultancy services.

iii. Carrying out research work, in areas in which the parent company is engaged.

iv. Promoting technical or financial collaborations between Indian companies and parent or overseas group company.

v. Representing the parent company in India and acting as buying / selling agent in India.

vi. Rendering services in information technology and development of software in India.

vii. Rendering technical support to the products supplied by parent/group companies.

viii. Foreign airline / shipping company.

Note: A Branch office should engage in activities same as of Parent Company. Branch office is not allowed to undertake manufacturing & Processing activities in India.

Step by step process to apply for setting up branch office in India

1. Approval by Reserve Bank of India (RBI) An application in Form FNC shall be completed & submitted to AD Category -1 banker alongwith the following documents:

 Copy of the Certificate of Incorporation / Registration attested by the Notary Public in the country of registration

 Latest Audited Balance sheet of the applicant company.

 Bankers' Report from the applicant’s banker in the host country / country of registration showing the number of years the applicant has had banking relations with that bank.

AD Banker shall after verify the form & all details & documents & further submit the application to Reserve Bank.

Reserve Bank after verifying the forms & details shall approve the application, if satisfied. RBI shall also provide Unique identification number (UIN) to the branch office in India.

2. Registration with Registrar of Companies (ROC)

Once the RBI Grants approval for setting up Branch office in India, next step is to register the Company with Registrar of Companies (ROC) within 30 days of approval.

Application has to be filed in Form FC-1 alongwith foreign Company documents like apostilled COI, AOA & MOA.

ROC shall issue the COI to the branch office alongwith PAN & TAN.

Annual Compliance requirements by Branch office in India

i. Branch office shall submit the annual activity certificate, signed by Chartered Accountant of the Company for the financial year on or before of 30 th April of next financial year to the AD Banker & DGIT (International taxation), New Delhi.

ii. Annual filing of Income Tax returns.

iii. Annual filing like AOC-4 & MGT-7A with ROC.

iv. Maintaining books of accounts.

v. Getting books of Accounts Audited.

vi. Filing Monthly GST returns (GSTR-1 & GSTR-3B).

vii. Annual GST returns- GSTR-9 & GSTR-9A (if applicable).

viii. Filing Quarterly TDS returns (if applicable).