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Entering the Indian market can be an exciting opportunity for foreign companies. One of the most effective and compliant ways to establish your business presence in India is by setting up a Liaison Office (LO) or Branch Office (BO) with approval from the Reserve Bank of India (RBI).

Guiding foreign businesses through FEMA compliance, NRI taxation, RBI approvals, and corporate registrations to ensure a smooth entry into India.

What is a Liaison Office in India?

A Liaison Office (LO), also known as a Representative Office, acts as a communication channel between the parent company abroad and Indian businesses.

👉 Key features of a Liaison Office:

• Functions only as a representative office.
• Cannot undertake commercial, trading, or industrial activities.
• Expenses must be funded entirely through inward remittances from the parent company.
• Used primarily for market research, brand promotion, and building local connections.

This makes a Liaison Office ideal for foreign companies exploring Indian market opportunities before establishing a larger presence.

Step-by-Step Process to Set Up a Liaison Office in India

1. Obtain RBI Approval – Submit an application with documents such as a letter of intent, audited financials, and a detailed business plan.
2. Appoint an Authorized Representative – A local person to coordinate with Indian authorities.
3. Register with ROC (Registrar of Companies) – As per the Companies Act.
4. PAN & TAN Application – To comply with Indian tax regulations.
5. Open a Bank Account – In the name of the Liaison Office with an RBI-approved bank.
6. Import-Export Code (if required) – For businesses involved in cross-border trade.
7. Compliance & Reporting – File annual returns with the RBI and ROC.

Once approved, the RBI will issue a Unique Identification Number (UIN) for the Liaison Office.

Key Registrations & Compliance Requirements

• PAN (Permanent Account Number): Mandatory for all tax-related transactions.
• TAN (Tax Deduction Account Number): Required for TDS/TCS compliance.
• Bank Account: Opened in the name of the Liaison/Branch Office.
• Import Export Code (IEC): Needed for trade-related activities.
• Annual Compliances: Audits, filing of annual returns with the Registrar of Companies and RBI, plus FEMA filings.

Basic & Ongoing Obligations of a Liaison Office

• Maintain accurate accounting records.
• File quarterly and annual returns under FEMA and Income Tax.
• Conduct statutory audits of financial statements.
• Ensure corporate governance, employee rights, and legal transparency.
• Report all remittances and expenses to the RBI.

Liaison Office vs. Branch Office – Which is Right for You?

• Liaison Office (LO): Best for market research, brand promotion, and business representation without profit-making activities.
• Branch Office (BO): Allows limited revenue-generating activities such as consultancy, export/import of goods, and professional services.

Our experts at VDC help you choose the most suitable structure depending on your business goals, compliance needs, and long-term India strategy.

FAQs on Liaison Office Setup in India

❓ Can foreign insurance companies or banks open liaison offices in India?

✅ Yes, subject to approval from the RBI and sectoral regulators.

❓ Can a liaison office earn revenue in India?

✅ No, it cannot engage in commercial activities.

❓ What is the validity of RBI approval?

✅ Approvals are typically granted for 3 years and can be renewed.

❓ Is FEMA compliance mandatory?

✅ Yes, FEMA governs all foreign exchange transactions, including remittances, capital inflows, and reporting.

Why Choose Vidhu Duggal & Company?

At Vidhu Duggal & Company, we are trusted by global clients for:

• RBI & FEMA Approvals for Liaison/Branch Offices.
• End-to-End Compliance Support under Companies Act, FEMA, and Income Tax.
• NRI & Foreign Business Advisory for smooth market entry in India.
• Custom Legal & Tax Strategies for long-term business growth.

With our deep expertise in FEMA, NRI taxation, and international business laws, we make the process of setting up a Liaison Office in India efficient, compliant, and hassle-free.

✅ Conclusion Setting up a Liaison Office in India is one of the simplest ways for foreign companies to establish a presence, build networks, and understand the Indian business landscape. However, it requires strict RBI approval, FEMA compliance, and annual reporting.