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Legal forms in which a foreign Company can set up its establishment in India?

  • Branch Office
  • Liaison Office
  • Project Office
  • Corporate Entity which could be wholly or partly owned by the foreign Company (FIPB route).
  • Joint Venture/ Partnerships etc.
Establishment of branch office of foreign company

For Establishment of Branch office of foreign Company in India. We have to follow provisions of two Act:

1. RBI Act
2. Companies Act, 2013

RBI ACT

INTRODUCTION OF BRANCH OFFICE

A branch office is set up by a foreign company in India to carry out the branch activities for its business. The foreign company can have any revenue from the Indian Branch office only from the activities allowed by the Reserve Bank of India. It has to meet all its expenses of the Indian office through remittances from the Head office or through the revenue generated from the Indian operation permitted by the Reserve Bank of India.

Foreign companies are allowed to set up a branch office in India. But unlike the case of setting up a Company, a branch office requires approval from the Reserve Bank of India (RBI). Only upon getting the branch license from RBI, the foreign Company is allowed to commence the operations.

BRANCH office is suitable for a foreign Company to test and understand the Indian market with a very strict control by the Reserve Bank of India, as it does allow the companies to do business but just to do the activity which are mentioned in the application of Branch office, Any additional activity to be carried by the Branch office shall be illegal.

Branch office can carry additional business activities only with the prior approval from the Reserve Bank of India (Procedure given below).

PERMITTED ACTIVITY OF BRANCH OFFICE IN INDIA:

Companies incorporated outside India and engaged in manufacturing or trading activities are allowed to set up Branch Offices in India and undertake the following activities in India;

  • Export/Import of goods
  • Rendering professional or consultancy services.
  • Carrying out research work, in which the parent Company is engaged.
  • Promoting technical or financial collaborations between Indian companies and parent or overseas group Company.
  • Representing the parent Company in India and acting as buying/selling agent in India.
  • Rendering services in Information Technology and development of software in India.
  • Rendering technical support to the products supplied by parent/group companies.
  • Foreign Airline/shipping Company.
 

Prohibited activities by the Branch

Companies incorporated outside India prohibited doing following activities through branch office in India.

  • Retail trading activities of any nature is not allowed for a Branch Office in India
  • A Branch Office is not allowed to carry out manufacturing or processing activities in India, directly or indirectly.
  • Profits earned by the Branch Offices are freely remittable from India, subject to payment of applicable taxes.
 

Procedure by which Branch Offices are permitted to remit profit outside India

Branch Offices are permitted to remit outside India profit of the branch net of applicable Indian taxes, on production of the following documents to the satisfaction of the Authorized Dealer through whom the remittance is affected:

a) A Certified copy of the audited Balance Sheet and Profit and Loss account for the
b) Relevant year;
c) A Chartered Accountant's certificate certifying -

i. The manner of arriving at the remittable profit
ii. That the entire remittable profit has been earned by undertaking the permitted activities
iii. That the profit does not include any profit on revaluation of the assets of the branch.

To read more in details, find the enclosed file
 

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