Published Thu, 15 Oct 2020 | Updated Tue, 16 Mar 2021
Business entities registered outside India (Foreign Companies) who wish to establish their presence in India for limited activities such as representative office, sourcing, technical and/or marketing support, import and export, etc may open a Branch Office (BO) or Liaison Office (LO) or Project Office (PO) in India subject to compliance of guidelines of Reserve Bank of India.
It is crucial to decide which business structure is more suitable for proposed business activities. Hence we have summarized permitted activities and key differences between Branch Office (BO) or Liaison Office (LO) or Project Office (PO) in the table below:
|Factors||Liaison Office||Branch Office||Project Office|
Liaison Office (also known as a representative office) means a place of business to act as a channel of communication between the principal place of business or Head Office in foreign country and entities in India.
|The Branch Office, on the other hand is allowed to undertake profile making activity to promote the business of Foreign company in India.||Project Office means a place of business in India to represent the interests of the foreign company executing a project in India but excludes a Liaison Office|
||Project Office shall not undertake or carry on any activity other than the activity relating and incidental to execution of the project for which it has been set up.|
|Eligibility criteria for establishment||
A person resident outside India can establish a Liaison Office in India provided it meets the following criteria:
A person resident outside India can establish a Branch Office in India provided it meets the following criteria:
|A foreign company can establish a Project Office in India only of it has secured a contract from an Indian company to execute a project in India.|
|Tenure||The validity of Liaison Office is generally 3 years (For NBFCs & Construction and development sector, validity period is 2 years)
AD category-I bank on an application from foreign company may extend the validity of Liaison Office by a further period of three years from the date of expiry of the original approval/ extension granted.
No extension is allowed for entities engaged in construction and development sectors and which are NBFC
|The validity of Branch Office is generally 3 years.
||The validity period of the project office is for the tenure of the project.|
|Operating Bank Account||Required
LO shall not maintain more than one bank account at any given time without the prior permission of Reserve Bank of India.
BO shall not maintain more than one bank account at any given time without the prior permission of Reserve Bank of India.
|Acquisition of property||Not allowed||Allowed and shall be governed by the guidelines issued under Foreign Exchange Management (Acquisition and transfer of immovable property outside India) Regulations.
||Allowed and shall be governed by the guidelines issued under Foreign Exchange Management (Acquisition and transfer of immovable property outside India) Regulations.|
|Remittance of profit/surplus||Not Applicable||
BOs are permitted to remit outside India profit of the branch net of applicable Indian taxes, on production of following documents to the satisfaction of AD Category I Bank:
AD Category – I bank can permit intermittent remittances by POs pending winding up / completion of the project subject to submission of the following: