Procedure & Documents Required for opening of a branch office of foreign company
Sachidananda Ganapathi Bhatta
Thanks & Regards,
Sachidananda B.G
CA & CS
Manager, Tax & Regulatory Compliance
B.C. Shetty & Co., CharteredAccountants Offices:
► No. 137, Ground Floor, 15th Cross, B/w 4th and 5th Main Road, Malleshwaram, Bangalore – 560 003. Ph: (080) 2344 3636 || 94481 90143 ||
► T. Krishnappa Building, Kadubisana Halli, Marathalli Outer Ring Road, Near Prestige Tech Park, Bangalore – 560 087. Ph: 99806 79868 || 98447 17161
► No. 37, “Ashritha”, Sirur Park, Vidya Nagar, Hubli – 21. Ph: (0836) 4251897 || 94481 21897
au...@bcshettyco.com || sathy...@bcshettyco.com || www.bcshettyco.com
________________________________________________
badrinath chavan
“Branch Office” can be opened by a Foreign Company in India with the prior approval of the Reserve Bank of India, Mumbai under the Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000.
“Branch Office” means a place of business to act as a Channel of Communication between Principal place of business of Head Office by whatever name called and entities in India which does not undertake any commercial, / trading/ industrial activities, directly or indirectly and maintain itself out of inward remittances received from abroad through normal banking channel.
A branch office in India of a Foreign Company is permitted to do the following activities only:
i. Representing in India the parent company / group companies.
ii. Promoting export import from / to India
iii. Promoting technical / financial collaboration between parent / group companies and companies in India
iv. Acting as a communication channel between the parent company and Indian Company.
Typical Points about Branch Office
This is considered a part of the foreign company and is not treated as a separate legal entity.
- The office can undertake trading activities, but not manufacturing.
- It is subject to taxation in India at 41.82% on income accrued in India.
- If there is a double taxation agreement with the country in which the foreign company is incorporated, the tax paid in India can be set off against the total tax payable by the parent company abroad.
- Branch offices may repatriate profits to their Head Office without obtaining prior approval.
- The Branch Office would not expand its activities or undertake any new trading, commercial or industrial activity other than that is expressly approved by the RBI
- The entire expenses of the Branch Office in India will be met either out of the funds received from abroad through normal banking channels or through income generated by it in India
- The Branch Office will not accept any deposits in India;
Repatriation of Profits
A Branch Office can remit the profits (net of any withholding
tax) generated out of its operations in India on production of the
prescribed documents, and on establishing that it has earned a net
profit by undertaking the permitted activities. The Branch Office need
not retain any profits as reserves in India
Branch Office can do only business activities similar to that to its parent company. No new activity permitted. In the highest tax slab of Indian Income Tax Lab(40%). The profit so earned net of taxes can be remitted to parent company.
Compliance under the Foreign Exchange Management Act:
1. In order to obtain the permission for opening of branch office in India, an application (Form FNC-1) shall be made to the Chief General Manager, Exchange Control Department, Reserve Bank of India, Central Office, Mumbai.
2. Following documents / information are required to be attached along with the application:-
i. English version of the Certificate of Incorporation and Memorandum & Articles of Association attested by the Indian Embassy / Notary Public in the country of registration.
ii. Latest Audited Balance Sheet of the Applicant Company / firm.
iii. Detail of Paid up Capital & Free Reserve of Applicant Company.
iv. Brief description of the activities of the applicant.
v. Value of goods imported from and / or exported to India by the applicant company in last three years.
vi. Detail of the activities proposed to be undertake from liaison office
vii. Detail of place where the office will be located in India.
Compliance under the Indian Companies Act, 1956
1. Under the Indian Companies Act, a Foreign Company need to deliver to the Registrar of Companies, New Delhi as well as to the State in which the principal place of business of the company is situated the following documents within 30 days of establishment:
a. Certified copy of the Memorandum and Articles of Association in English version.
b. Full address of the Registered office or Principal office of the Company abroad.
c. List of Directors and Secretary of the company.
d. The name and address of some one or more persons resident in India who is or are authorized to accept on behalf of the company service of any notice served on the company.
e. The full address of the office of the company in India which of its place of business.
2. The foreign company is required to submit the following documents with the Registrar of companies annually:-
i. A copy of the letter issued by the Reserve Bank of India granting permission for opening of branch/ liaison office in India valid up to the end of the relevant accounting year.
ii. A statement of receipts of payments made by the Indian liaison Office certified by the representative in India and Chartered Accountant.
iii. A Statement of Assets & Liabilities in India certified by the above said persons.
iv. A certificate from Chartered Accountant stating that company did not carry out any trading or manufacturing activities in India.
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