Opening branch office

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Querist : Anonymous (Querist)

20 July 2011 Can anyone tell me the procedure for opening a branch by an Indian company

Amol Gopal Kabra (CA,CS,DISA)

Amol Gopal Kabra (CA,CS,DISA) (Expert)
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20 July 2011 There is no specific procedure. It depends upon case to case.

You have to comply with all the local laws of that state before opening the branch. Like, if anybody wants to open a shop or establishment in Maharashtra, he has to take a Shop Act License. Also, if the branch is in another state than head office, then in case then it has go get registered under the respective state VAT law. If the company is liable for excise or service tax, it has to register the additional premises with the department. If liable for TDS, it has to take a TAN number for the branch. There are many more similar compliances that a company has to do for opening a branch office.

CA. Anuj Gupta

CA. Anuj Gupta (Expert)
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20 July 2011 A firm or a company or a body corporate registered or incorporated in India (hereinafter referred to as ‘the Indian entity’) may open, hold and maintain in the name of its office (trading or non-trading) or its branch set up outside India or its representative posted outside India, a foreign currency account with a bank outside India by making remittances from India for the purpose of normal business operations of the office/branch or representative;
Provided that —
(a) the overseas branch/office has been set up or representative is posted overseas for conducting normal business activities of the Indian entity;
(b) the total remittances made under this sub-Regulation by the Indian entity, to all such accounts in an accounting year shall not exceed
(i) 15 per cent of the average annual sales/ income or turnover of the Indian entity during the last two financial years or up to 25 per cent of the net worth whichever is higher, where the remittances are made to meet initial expenses of the branch or office or representative. And

(ii) 10 per cent of such average annual sales/ income or turnover during the last financial years where the remittances are made to meet recurring expenses of the branch or office or representative
(c) overseas branch/office/representative shall not enter in any contract or agreement in contravention of the Act, Rules or Regulations made thereunder;
(d) the a account so opened, held or maintained shall be closed,
(i) if the overseas branch./office is not set up within six months of opening the account, or
(ii) Within from one month of closure of the overseas branch/office, or
(iii) where no representative is posted for six months.
and the balance held in the account shall be repatriated to India;
Provided further that the restriction contained in clause (b) of the first proviso shall not apply in a case where -
(a) the remittances to the account maintained under this sub-Regulation are made out of funds held in EEFC account of the Indian entity, or
(b) the overseas branch/office is set up or representative posted by a 100% EOU or a unit in EPZ or in a Hardware Technology Park or in a Software Technology Park, within two years of establishment of the Unit.
Explanation: For the purpose of this sub-Regulation,
(a) Purchase of acquisition of Office equipments and other assets required for normal business operations of the overseas branch/office/representative will not be deemed as a capital account transaction; and
(b) Transfer or acquisition of immovable property outside India, other than by way of lease not exceeding five years, by the overseas branch/office/representative will be subject to the Foreign Exchange Management (Acquisition and Transfer of Immovable Property outside India) Regulations, 2000".

Anuj
+91-9810106211
femaquery@gmail.com

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