Compliance related to Liaison/Representative Office of a Foreign Company in India

INTRODUCTION

A representative office ("RO") is established by a legal entity to conduct marketing and other non-transactional operations generally in a foreign country where a branch office or subsidiary is not warranted. This office acts as a facilitator of trade between the foreign parent company and market in India and is not allowed to conduct any revenue generating business and operating cost must be sustained by inward remittances received from their foreign parent company. No minimum capital is required for setting up RO.

ACTIVITIES PERMITTED FOR RO

A RO will undertake the following activities in India:-

1. Representing the foreign parent company in India

2. Collecting market information about products to Indian customers.

3. Promoting collaborations between parent/group companies and companies in India.

4. Acting as a communication channel between parent company and parties in India.

ELIGIBILITY 

1. A beneficial track record of the past 3 years of the applicant company is required.

2. The parent company should own a net worth of more than $50,000.

3. The parent company provides financial aid to all the operations of the liaison office since the liaison office is not allowed to earn any income in India.

4. The name must be same as the foreign parent company. 

5. Approval will be made for each new liaison office from the Reserve Bank of India with complete justification.

6. Income tax authorities will impose income tax on a liaison office.

DOCUMENTS

S. No.	Parent Company	Authorized Signatory
1.	Certificate of Incorporation / Registration of Foreign Company	Five Colour Photos
2.	Memorandum of Association (MOA) and Articles of Association (AOA)	Five Passport Copies
3.	List of Details in respect of Directors/Key Executives	Business Visa Copy with Immigration Stamp of arrival
4.	Details of shareholders of the applicant company	National Identity Card - 5 Copy
5.	Net worth certificate attested by Certified Public Accountant (CPA)	Latest Address Proof (Bank Statement/ Electricity/ Water Bill/ Phone Bill)
6.	Audited financial statement of the last Three preceding years	Board Resolution Appointing the AR
7.	Banker’s Report from the applicant’s banker in the host country	Power of Attorney in the name of AR

GOVERNMENT FORMS AND DOCUMENTS

After receiving the above documents, the following documents should be sent for signature by the parent company and the authorized signatory:-

1. Board Resolution approving the opening of the liaison office in India

2. Declaration from the applicant on FDI eligibility and source of funds

3. Declaration about the nature of the activity, the location of the activity of proposed RO and  the parent company.

4. Form FNC

5. Letter of Comfort form holding company

PROCESS OF REGISTRATION OF RO

The following is the process of registering RO in India:-

1. Filling of Application with RBI through AD Bank- A foreign company's RO application is filed with the FNC. The application is submitted through AD Bank to the Reserve Bank of India (Authorised Dealer). The AD bank plays a crucial function since it is through them that all contact with the RBI is routed.

2. Verification Of KYC From Banker Of Parent Company- A request for document examination is issued to the banker of the foreign firm. The process of sending requests for verification purposes is called swift-based verification. Once the foreign lender has validated the documentation, the application is sent to the RBI for approval. The RBI may also request other documentation, depending on the circumstances.

3. Approval of RBI for Liaison Office Registration in India- A particular policy is followed for approving the RO in India by the AD Banker. Priority is given to the cases where the automatic route is not available.

4. Registration of RO with ROC- Once the RO is formed, its bank account is opened, wherein the FDI should reach within 180 days of forming the company with an advance announcement to the banker.

5. PAN Card, Tax Deduction Number, and Bank Account Opening- The income tax department of India issues a unique 10 digit number, known as PAN number. Once the PAN number is obtained, the RO is eligible to open its bank account. And every taxpayer must obtain a Tax Deduction Account Number to obey all the TDS norms.

6. GST Registration & IEC- On obtaining Bank Account and cheque book, a copy of the check is needed to apply GST registration and Import Export Code.