Branch office Registration
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Branch Office Registration Process
The establishment of a branch office, liaison office, project office, or any other place of business in India by foreign entities is regulated under Section 6(6) of FEMA. A Branch Office is defined under Regulation 2(d) of FEMA (Establishment in India of Branch or Liaison Office or Project Office or any other place of business) Regulations 2016.
Branch office registration allows a foreign company to operate as a legal business entity in India. The branch office can conduct business activities similar to those of the parent company in their home country. However, manufacturing activities are restricted for the branch office.
Taxation
Profits earned by the foreign branch office are taxed at 40% plus applicable surcharges. Additionally, an education cess of 4% is levied. The branch office must register for GST if its aggregate turnover exceeds the threshold limit or may opt for voluntary registration.
Annual Compliance
The branch office must file an Annual Activity Certificate as of March 31, certified by a Chartered Accountant, along with the audited balance sheet by September 30 each year. It is also required to file the necessary forms with the Registrar of Companies and submit an income tax return to the income tax department.
Registration Timelines
The estimated time period for registration is 3 to 4 weeks, although this may vary depending on the case.
Documents Required from the Foreign Company
The following documents, attested by the Indian Embassy or Notary Public in the country of registration, are required:
- Certificate of Incorporation
- Memorandum of Association
- Articles of Association
- Complete details of Directors and Key Executives
- Full details of the shareholders
- Latest audited financial statement
- Net worth as per the latest audited balance sheet, certified by a Certified Public Accountant
- A report from the applicant’s banker in the host country
Documents Required for Office Address Registration
- 5 copies of passport
- 5 passport-size photographs
- A copy of Business Visa with Immigration Stamp of arrival
- 5 copies of the National Identity Card
- Latest Address Proof (Electricity Bill/Phone Bill/Water Bill/Bank Statement)
- Power of Attorney in the name of Authorized Representatives
- Board Resolution appointing the Authorized Representatives
Preparing Forms and Documents
The applicant must prepare the following documents:
- Board resolution for establishing the branch office in India
- Declaration regarding the eligibility of FDI and source of funds
- Declaration regarding the nature of the activity to be undertaken by the branch office and its location
- Declaration regarding the nature of the business activity and location of the business entity
- Form FNC
Branch Office Registration Process in India
Filing of Application with RBI Through AD Bank
The foreign company submits the application for establishing the branch office to the Authorized Dealer Category-1 Bank (AD Category-1 Bank) in Form FNC along with the required documents. The AD Category-1 Bank verifies the application and documents and, if satisfied, grants approval for establishing the branch office.
Forwarding of Form FNC to RBI by AD Category-1 Bank
The AD Category-1 Bank forwards Form FNC and the submitted details to the General Manager of RBI, CO Cell, New Delhi, for the allotment of a Unique Identification Number (UIN) to the branch office. After receiving the UIN, the AD Category-1 Bank issues the approval letter for establishing the branch office to the applicant. If the foreign company does not establish the branch office within six months from the date of the approval letter, the approval ceases to have effect.
Prior Approval from RBI in Special Cases
The AD Category-1 Bank forwards the application to the General Manager, RBI, CO Cell, New Delhi, for obtaining prior approval in the following cases:
- If the applicant is a citizen of or is registered/incorporated in Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau, Jammu and Kashmir, North East Region, Andaman, and Nicobar Islands.
- If the principal business of the applicant falls under the sectors of Defence, Telecom, Private Security, Information and Broadcasting.
- If the applicant is a Non-Governmental Organisation, Non-Profit Organisation, or Body/Agency of a Foreign Government.
KYC Verification of Parent Company
Swift-based verification is conducted, wherein a request for scrutiny of documents is sent to the foreign banker. Once KYC verification is completed, the application is moved to the next level.
Approval of RBI for Establishing Branch Office in India
Approval is given based on the specific approval policy.
Registration of Branch Office with ROC
Form FC-1 is filed with the ROC within 30 days of obtaining approval from RBI for establishing the branch office in India. DIN for the Indian directors and DSC for the authorized signatories are required for filing various forms.
Opening of Bank Account
After obtaining PAN from the income tax department, the branch office can open a bank account. Every branch must obtain the Tax Deduction and Collection Account Number (TAN) to deduct and collect tax.
Import Export Code (IEC)
After opening a bank account and obtaining a cheque book, the branch office must obtain an IEC.
FAQs
Upon receiving the complete set of authentic documents, the applicant company and the authorized signatory must draft the following documents for signature purposes:
- Resolution of the Board of Directors approving the establishment of a branch office in India.
- Declaration by the applicant on FDI eligibility and funding source.
- Statement describing the nature of business activities and the location of the proposed branch office’s activities.
- Form FNC
The income tax rate on revenues earned by a branch office of a foreign company is 40%, with additional levies. GST is a tax levied on the sale of goods and services.
The estimated time frame for registration is 3 to 4 weeks, though it may vary from case to case.
The branch office in India must obtain a PAN and TAN number. It must also register for GST if the aggregate turnover of the branch exceeds the threshold limit.
