Setting up branch office
This query is : Resolved
26 June 2010
There is an us based company .. It want to setup a branch office in India . what are the procedural requirements for the same.. please tell necessary guidelines for the same...
26 June 2010
Procedure for opening branch offices by a foreign company
The opening up of branch offices is one of the options by which a foreign company can set up its business operations in India. It needs to obtain a prior permission from Reserve Bank of India (RBI) for setting up such offices in India. ROC approval is also required by registering the foreign company with the ROC.
As per the guidelines issued by RBI, these branch offices are subjected to the following conditions:-
The branch office cannot expand its activities or undertake any new trading, commercial or industrial activity other than those which are expressly approved by the RBI
The entire expense of the branch office in India will be met either out of the funds received by it from abroad through normal banking channels or through income generated by it in India
The branch office cannot accept any deposits in India;
The commission earned by the branch office from parties abroad for any agency business will be repatriated to India through normal banking channels.
Also, the foreign companies engaged in manufacturing and trading activities abroad are allowed to set up branch offices in India for the following purposes:
Undertaking export or import of goods
Rendering professional or consultancy services
Carrying out research work, in which the parent company is engaged (provided that the results of the research work are made available to the Indian Companies)
Promoting technical or financial collaborations between Indian companies and the parent or overseas group company
Representing the parent company in India and acting as buying/selling agents in India
Rendering services in information technology and development of software in India
Rendering technical support to the products supplied by the parent/ overseas group companies
Foreign airlines or shipping companies are also permitted to open their branch offices in India.
But, branch offices can undertake only trading activities and are not permitted to carry out manufacturing activities on its own, though it is permitted to sub contract these to Indian manufacturers. Such offices are a part of the foreign company and are not treated as a separate legal entity.
For opening a branch office, the foreign company needs to submit its formal application to the Chief General Manager, Exchange Control Department (Foreign Investment Division), RBI Central Office, Mumbai in the form FNC-1. These applications are considered on a case-to-case basis. The RBI generally gives permission in a time span of about 2 to 4 weeks. The application must include the following details:-
Operating history of the company worldwide
Proposed interests and activities in India
Reasons for wanting to open a branch office and
Any foreign exchange implications for such matters.
The branch offices may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines.They need not retain any profits as reserves in India. But in certain cases, where income is deemed to have originated in India and such income includes royalties, fees for technical services, interest and capital gains including capital gains from share of capital in India, branch offices may repatriate profits to their Head Office without obtaining prior approval from RBI.
The opening up of branch offices is one of the options by which a foreign company can set up its business operations in India. It needs to obtain a prior permission from Reserve Bank of India (RBI) for setting up such offices in India. ROC approval is also required by registering the foreign company with the ROC.
As per the guidelines issued by RBI, these branch offices are subjected to the following conditions:-
The branch office cannot expand its activities or undertake any new trading, commercial or industrial activity other than those which are expressly approved by the RBI
The entire expense of the branch office in India will be met either out of the funds received by it from abroad through normal banking channels or through income generated by it in India
The branch office cannot accept any deposits in India;
The commission earned by the branch office from parties abroad for any agency business will be repatriated to India through normal banking channels.
Also, the foreign companies engaged in manufacturing and trading activities abroad are allowed to set up branch offices in India for the following purposes:
Undertaking export or import of goods
Rendering professional or consultancy services
Carrying out research work, in which the parent company is engaged (provided that the results of the research work are made available to the Indian Companies)
Promoting technical or financial collaborations between Indian companies and the parent or overseas group company
Representing the parent company in India and acting as buying/selling agents in India
Rendering services in information technology and development of software in India
Rendering technical support to the products supplied by the parent/ overseas group companies
Foreign airlines or shipping companies are also permitted to open their branch offices in India.
But, branch offices can undertake only trading activities and are not permitted to carry out manufacturing activities on its own, though it is permitted to sub contract these to Indian manufacturers. Such offices are a part of the foreign company and are not treated as a separate legal entity.
For opening a branch office, the foreign company needs to submit its formal application to the Chief General Manager, Exchange Control Department (Foreign Investment Division), RBI Central Office, Mumbai in the form FNC-1. These applications are considered on a case-to-case basis. The RBI generally gives permission in a time span of about 2 to 4 weeks. The application must include the following details:-
Operating history of the company worldwide
Proposed interests and activities in India
Reasons for wanting to open a branch office and
Any foreign exchange implications for such matters.
The branch offices may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines.They need not retain any profits as reserves in India. But in certain cases, where income is deemed to have originated in India and such income includes royalties, fees for technical services, interest and capital gains including capital gains from share of capital in India, branch offices may repatriate profits to their Head Office without obtaining prior approval from RBI.
Message likes :
1 times
28 June 2010
Thanks sir... for guiding me for the same..I think this is a very cumbersome process .. If without opening a branch office that foreign company makes remittances in India then Income tax department will object it or not..... because as on date that company is remitting around 70 lakhs rupees per year in India... Is it fall under tax audit perview...
please do suggest me for the same..
please do suggest me for the same..
01 August 2023
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Is this income indian or foreign income?
- ITC temporary reversal and reclaim
- Applicable TDS rate for sale of property in Nov 2024
- Inventory of finished goods
- Can we claim ITC of Feb-2024 in the month of November-2024 which was not claimed by oversight
- Tds on building rent monthly
- Clarification on Documentation of Paid-Up Capital Contribution by Directors
- Quiery in relation to GST liability in case of an advocate who has obtained GST registration.
- RCM INVOICING FROM NOV-2024
- Confusion around Form 26QB fields
- REGARDING ACCOUNTING CODE FOR SERVICE TAX PAYMENT
- Redevolpment of bldg in mumbai
- Refund of AY 22-23
- LAST YEAR 2022-23 ITC IN NEXT YEAR 2023-24 REPORITNG IN GSTR-9
- MIS MATCH OF INVOICE NUMBER
- IGST Credit-Show cause notice issued-confusion
- Issue of gst e invoice
- How to adjusted advances given or receipt
- Foreign vendor without PAN unable to to register due to non receipt of OTP on foreign number ?
- 133(6) DIN INVALID format error - ->WHERE TO REPLY 133(6) notice?
Trending Online Classes
CAclubindia
