A) With effect from February 1, 2010, foreign companies/entities desirous of setting up of Liaison Office / Branch Office (LO/BO) are required to submit their application in Form FNC along with the documents mentioned therein to Foreign Investment Division, Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai through an Authorised Dealer bank. This form is available at www.rbi.org.in
(B) The applications from such entities in Form FNC will be considered by the Reserve Bank under two routes:
(a) Reserve Bank Route - Where principal business of the foreign entity falls under sectors where 100 per cent Foreign Direct Investment (FDI) is permissible under the automatic route.
(b) Government Route - Where principal business of the foreign entity falls under the sectors where 100 per cent FDI is not permissible under the automatic route. Applications from entities falling under this category and those from Non - Government Organisations / Non - Profit Organisations / Government Bodies / Departments are considered by the Reserve Bank in consultation with the Ministry of Finance, Government of India.
(C) The following additional criteria are also considered by the Reserve Bank while sanctioning Liaison/Branch Offices of foreign entities:(C) The following additional criteria are also considered by the Reserve Bank while sanctioning Liaison/Branch Offices of foreign entities:
(a) Track Record
- For Branch Office — a profit making track record during the immediately preceding five financial years in the home country.
- For Liaison Office — a profit making track record during the immediately preceding three financial years in the home country.
(b) 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].
- For Branch Office — not less than USD 100,000 or its equivalent.
- For Liaison Office — not less than USD 50,000 or its equivalent.
(D) Permission to set up Liaison offices is initially granted for a period of 3 years and this may be extended from time to time by the Authorised Dealer in whose jurisdiction the office is set up. The Branch / Liaison offices established with the Reserve Bank's approval will be allotted a Unique Identification Number (UIN) (www.rbi.org.in/scripts/Fema.aspx). The BOs / LOs shall also obtain Permanent Account Number (PAN) from the Income Tax Authorities on setting up the offices in India.
(E) Liaison/Branch offices have to file an Annual Activity Certificate (AACs) from the Auditors, as at end of March 31, along with the audited Balance Sheet on or before September 30 of that year, stating that the Liaison Office has undertaken only those activities permitted by Reserve Bank of India. In case the annual accounts of the LO/ BO are finalized with reference to a date other than March 31, the AAC along with the audited Balance Sheet may be submitted within six months from the due date of the Balance Sheet.
LOs/BOs are required to furnish copy of the Annual Activity Certificate (AAC) to Director General of Income Tax (International Taxation), Drum Shaped Building, I.P. Estate, New Delhi 110002.Copies of the AACs submitted to the DGIT (International Taxation) should be accompanied by audited financial statements including receipt and payment account.
Further, at the time of renewal of permission of LOs by AD banks, they may note to endorse a copy of each such renewal to the office of the DGIT (international Taxation).
(F) All the new entities setting up LO/BO/PO shall also:
(a) Submit a report containing information as per Annex (given in AP DIR.Cir.35 dated September 25, 2012) within five working days of the LO/BO/PO becoming functional to the DGP of the state concerned in which LO/BO/PO has established its office; if there are more than one office of such a foreign entity, in such cases to each of the DGP concerned of the state where it has established office in India;
(b) A copy of the report as per above mentioned Annex shall also be filed with the DGP concerned on annual basis along with a copy of the Annual Activity Certificate/Annual report required to be submitted by LO/BO/PO concerned, as the case may be.
A copy of report thus filed as above shall also be filed with AD by LO/BO/PO concerned.
(G) The existing LO/BO/PO shall henceforth report the information as per above mentioned Annex along with the copy of Annual Activity Certificate/Annual report to DGP of state concerned and also file a copy of the same with AD bank