RBI, Thane
RBI, Thane
RBI, Thane
To,
Madam / Sir,
Yours faithfully,
(C D Srinivasan)
Chief General Manager
1
INDEX
(A) General Criteria – Liaison Office / Branch Office 3
(B) Liaison Office 4
(C) Branch Offices 6
(D) Application for Undertaking Additional Activities or
Additional Branch / Liaison Offices 7
(E) Reporting by Branch/Liaison Offices 8
Annex 1
FNC
Annex 2
Format of the Letter of Comfort
Annex 3
Format of report to DG of Police
Annex 4
Annual Activity Certificate
Appendix
List of Notifications/Circulars consolidated in this Master Circular
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Establishment of Branch/Liaison/Project Offices in India by Foreign Entities
(A) GENERAL CRITERIA – LIAISON OFFICE / BRANCH OFFICE
A body corporate incorporated outside India (including a firm or other association
of individuals), desirous of opening a Liaison Office (LO) / Branch Office (BO) in
India have to obtain permission from the Reserve Bank under provisions of
FEMA 1999. The applications from such entities in Form FNC (Annex-1) will be
considered by Reserve Bank under two routes:
Reserve Bank Route — Where principal business of the foreign entity falls
under sectors where 100 per cent Foreign Direct Investment (FDI) is permissible
under the automatic route.
Government Route — Where principal business of the foreign entity falls under
the sectors where 100 per cent FDI is not permissible under the automatic route.
Applications from entities falling under this category and those from Non -
Government Organisations / Non - Profit Organisations / Government Bodies /
Departments are considered by the Reserve Bank in consultation with the
Ministry of Finance, Government of India.
The following additional criteria are also considered by the Reserve Bank while
sanctioning Liaison/Branch Offices of foreign entities:
Track Record
For Branch Office — a profit making track record during the immediately
preceding five financial years in the home country.
For Liaison Office — a profit making track record during the immediately
preceding three financial years in the home country.
• Net Worth [total of paid-up capital and free reserves, less intangible assets as
per the latest Audited Balance Sheet or Account Statement certified by a
Certified Public Accountant or any Registered Accounts Practitioner by
whatever name].
o For Branch Office — not less than USD 100,000 or its equivalent.
o For Liaison Office — not less than USD 50,000 or its equivalent.
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The application for establishing BO / LO in India should be forwarded by the foreign entity
through a designated AD Category - I bank to the Chief General Manager-in-Charge,
Reserve Bank of India, Foreign Exchange Department, Foreign Investment Division,
Central Office, Fort, Mumbai-400 001, along with the prescribed documents including
• English version of the Certificate of Incorporation / Registration or Memorandum & Articles
of Association attested by Indian Embassy / Notary Public in the Country of Registration.
• Latest Audited Balance Sheet of the applicant entity.
Applicants who do not satisfy the eligibility criteria and are subsidiaries of other companies
can submit a Letter of Comfort from their parent company as per Annex -2, subject to the
condition that the parent company satisfies the eligibility criteria as prescribed above. The
designated AD Category - I bank should exercise due diligence in respect of the
applicant’s background, antecedents of the promoter, nature and location of activity,
sources of funds, etc. and also ensure compliance with the KYC norms before forwarding
the application together with their comments/ recommendations to the Reserve Bank.
The Branch / Liaison offices established with the Reserve Bank's approval will be allotted
a Unique Identification Number (UIN) (www.rbi.org.in/scripts/Fema.aspx). The BOs / LOs
shall also obtain Permanent Account Number (PAN) from the Income Tax Authorities on
setting up the offices in India.
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engaged in insurance business has to be directly submitted to the Department of Banking
Operations and Development, Reserve Bank and Insurance Regulatory and Development
Authority (IRDA), respectively as stipulated by them, as hitherto. Further, no extension
would be considered for LOs of entities which are NBFCs and those engaged in
construction and development sectors (excluding infrastructure development companies).
Upon expiry of the validity period, these entities have to either close down or be converted
into a Joint Venture (JV) / Wholly Owned Subsidiary (WOS), in conformity with the extant
Foreign Direct Investment policy.
b) Retail trading activities of any nature is not allowed for a Branch Office in India.
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Procurement of goods for export and sale of goods after import are allowed only on wholesale basis
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c) A Branch Office is not allowed to carry out manufacturing or processing activities in
India, directly or indirectly.
d) Profits earned by the Branch Offices are freely remittable from India, subject to payment
of applicable taxes.
(ii) In the event of winding-up of business and for remittance of winding-up proceeds, the
branch shall approach an AD Category – I bank with the documents as mentioned under
"Closure of Liaison / Branch Office" except the copy of the letter granting approval by the
Reserve Bank.
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Foreign Investment Division, Central Office, Mumbai, justifying the need with comments of
the designated AD Category - I bank.
Requests for establishing additional BO / LOs may be submitted through fresh FNC form
(Annex 1), duly signed by the authorized signatory of the foreign entity in the home country
to the Reserve Bank of India as explained above. However, the documents mentioned in
form FNC need not be resubmitted, if there are no changes to the documents already
submitted earlier.
If the number of Offices exceeds 4 (i.e. one BO / LO in each zone viz; East, West,
North and South), the applicant has to justify the need for additional office/s.
The applicant may identify one of its Offices in India as the Nodal Office, which will
coordinate the activities of all Offices in India.
e.2. Branch Offices / Liaison Offices have to file Annual Activity Certificates (AAC) (Annex
4) from Chartered Accountants, at the end of March 31, along with the audited Balance
Sheet on or before September 30 of that year. In case the annual accounts of the LO/ BO
are finalized with reference to a date other than March 31, the AAC along with the audited
Balance Sheet may be submitted within six months from the due date of the Balance Sheet
to the designated AD Category I bank, and a copy to the Directorate General of Income
Tax (International Taxation), New Delhi along with the audited financial statements
including receipt and payment account. [as amended vide AP (DIR) No.55 dated
November 26, 2012]
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The certificates are to be filed by the following offices as applicable:
In case of a sole BO/LO, by the BO/LO concerned;
In case of multiple BO/LO, a combined Annual Activity Certificate in respect of all
Offices in India by the Nodal Office of the BO/LOs.
The designated AD Category - I bank shall scrutinize the Annual Activity Certificate and
ensure that the activities undertaken by the BO/LO are being carried out in accordance
with the terms and conditions of the approval given by the Reserve Bank. In the event of
any adverse findings being reported by the Auditor or noticed by the designated AD
Category -I bank, the same should be reported immediately by the designated AD
Category–I bank to the respective Regional Office of the Reserve Bank in respect of LOs
and to the Central Office of the Reserve Bank in the case of BOs, along with the copy of
the Annual Activity Certificate and their comments thereon.
e.3. A copy of the report in Annex 3 shall be filed with the DGP concerned on annual basis
along with a copy of the Annual Activity Certificate, and also with the AD concerned. [As
amended vide AP (DIR) No.35 dated September 25, 2012]
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repatriated to India.
(c) No-objection / Tax Clearance Certificate from Income-Tax authority for the
remittance/s.
(d) Confirmation from the applicant/parent company that no legal proceedings in any Court
in India are pending and there is no legal impediment to the remittance.
(e) A report from the Registrar of Companies regarding compliance with the provisions of
the Companies Act, 1956, in case of winding up of the Office in India.
(f) Any other document/s, specified by the Reserve Bank while granting approval. The
designated AD Category - I banks has to ensure that the BO / LOs had filed their
respective Annual Activity Certificates with the Reserve Bank for the previous years, in
respect of the existing Branch/Liaison Offices. Confirmation about the same can be
obtained from the Central Office of the Reserve Bank in the case of BOs and from the
Regional Office concerned in the case of LOs.
Closure of such BO / LO has to be reported by the designated AD Category - I bank to the
Reserve Bank (the Regional Office concerned for LOs and Central Office for BOs), along
with a declaration stating that all the necessary documents submitted by the BO / LO have
been scrutinized and found to be in order. If the documents are not found in order or cases
are not covered under delegated powers, the AD Category - I bank may forward the
application to the Reserve Bank, with their observations, for necessary action. All the
documents relating to the BO / LO operations may be retained by the AD Category - I bank
for verification by the internal auditors of the AD / inspecting officers of the Reserve Bank.
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iv. a company or entity in India awarding the contract has been granted Term Loan by
a Public Financial Institution or a bank in India for the project. However, if the above
criteria are not met, the foreign entity has to approach the Reserve Bank of India,
Central Office, for approval.
Setting up of Project Offices by foreign Non-Government Organisations/Non-Profit
Organisations/Foreign Government Bodies/Departments, by whatever name called, are
under the Government Route. Accordingly, such entities are required to apply to the
Reserve Bank for prior permission to establish an office in India, whether Project Office or
otherwise. [as amended vide AP (DIR) No.31 dated September 17, 2012]
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g.3 Intermittent Remittances by Project Offices in India
(i) AD Category – I bank can permit intermittent remittances by Project Offices pending
winding up / completion of the project provided they are satisfied with the bonafides of
the transaction, subject to the following:
a. The Project Office submits an Auditors' / Chartered Accountants’ Certificate
to the effect that sufficient provisions have been made to meet the liabilities in
India including Income Tax, etc.
b. An undertaking from the Project Office that the remittance will not, in any way,
affect the completion of the Project in India and that any shortfall of funds for
meeting any liability in India will be met by inward remittance from abroad.
(ii) Inter-Project transfer of funds requires prior permission of the Regional Office
concerned of the Reserve Bank under whose jurisdiction the Project Office is situated.
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f. Tenure of Project Office,
g. Brief details of the Project undertaken,
h. AD branch with whom the account has been opened and the foreign currency in
which the account is opened,
i. An undertaking to the effect that the Project Office is eligible to avail of the General
Permission under Regulation 5(ii) to RBI Notification No.22/2000 – RB dated May
3, 2000 read with Notification No. FEMA 95 dated July 2, 2003 showing the reason
thereof.
This Report shall be forwarded through the AD branch to the Regional Office concerned of
the Reserve Bank of India within 2 months of establishment of the Project Office.
(iii) The Project Office shall also submit to the AD branch on an annual basis, a Certificate
from a Chartered Accountant showing the Project Status and certifying that the
accounts of the Project Office has been audited and the activities undertaken are in
conformity with the General / Specific permission given by the Reserve Bank.
Additional Reporting Requirements: A copy of the report in Annex 3 shall be filed with
the DGP concerned on annual basis along with a copy of the annual certificate, and also
with the AD concerned. [as amended vide AP (DIR) No.35 dated September 25, 2012]
(ii) Entities from Nepal are allowed to establish only Liaison Offices in India.
(iii) Branch/Project Offices of a foreign entity are permitted to acquire immovable property
by way of purchase for their own use and to carry out permitted/incidental activities.
2
A.P.(Dir Series) circular No. 93 dated January 15, 2014
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However, entities from Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, Bhutan or
China are not allowed to acquire immovable property in India for a Branch / Project Office
without prior RBI approval.
All Branch / Project Offices including Liaison Offices, have general permission to carry out
permitted / incidental activities from lease property subject to lease period not exceeding
five years.
(iv) Branch / Liaison / Project Offices are allowed to open non-interest bearing INR current
accounts in India. Such Offices are required to approach their Authorised Dealers for
opening the accounts.
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(v) Powers relating to transfer of assets of Liaison / Branch Office/Project Office have
been delegated to AD Category-1 Banks subject to compliance with the following
stipulations:
a. Such proposals will be considered only from LO/BOs who are adhering to the
operational guidelines stipulated in AP DIR Circular No.23 & 24 of December 30, 2009
such as (i) submission of AACs (up to the current financial year) at regular annual
intervals with copies endorsed to DGIT (International Taxation) and (ii) obtained PAN
from IT Authorities and have got registered with ROC under Companies Act 1956, if
necessary. Similarly, proposals from POs should conform to the guidelines issued in
AP DIR Cir.No.44 dated May 17, 2005 with regard to initial reporting requirements
(para.2.3) and submission of CA certified annual report indicating project status
(para.2.4).
b. A certificate is to be submitted from the Statutory Auditor furnishing details of assets to
be transferred indicating their date of acquisition, original price, depreciation till date,
present book value or WDV value and sale consideration to be obtained. Statutory
Auditor should also confirm that the assets were not re-valued after their initial
acquisition. The sale consideration should not be more than the book value in each
case.
3
A.P.(Dir Series) circular No. 142 dated June 12, 2014
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c. The assets should have been acquired by the LO/BO/PO from inward remittances and
no intangible assets such as good will, pre-operative expenses should be included. No
revenue expenses such as lease hold improvements incurred by LO/BOs can be
capitalised and transferred to JV/WOS.
d. AD bank to ensure payment of all applicable taxes while permitting transfer of assets.
e. Transfer of assets to be allowed by AD banks only when the foreign entity intends to
close their LO/BO/PO operations in India.
f. Credits to the bank accounts of LO/BO/PO on account of such transfer of assets will be
treated as permissible credits.
(vi) 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
Authorised Dealer through whom the remittance is effected
a. A Certified copy of the audited Balance Sheet and Profit and Loss account for the
relevant year
b. 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.
(vii) Authorised Dealers can allow term deposit account for a period not exceeding 6
months in favor of a branch/office of a person resident outside India provided the bank is
satisfied that the term deposit is out of temporary surplus funds and the branch / office
furnishes an undertaking that the maturity proceeds of the term deposit will be utilised for
their business in India within 3 months of maturity. However, such facility may not be
extended to shipping/airline companies.
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liaison office in India with permission of the Reserve Bank of India. Liaison / Branch Offices
established in pre FEMA period without approval of Reserve Bank of India and those that
have not been allotted a Unique Identification Number by the Reserve Bank of India may
approach the Reserve Bank through their ADs to regularise the offices under FEMA 1999.
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Annex 1
FNC
Application for Establishment of Branch/Liaison Office in India
The application form shall be completed and submitted to the AD Category - I bank
designated by the applicant for onward transmission to the Chief General Manager-in -
Charge, Reserve Bank, Foreign Exchange Department, Foreign Investment Division,
Central Office, Fort, Mumbai – 400001 along with the documents mentioned in item (viii) of
the Declaration.
No. Details Particulars
1. Full name and address of the applicant.
Telephone Number(s)
Fax Number(s)
E-mail ID
2. Paid-up capital
ii) Free Reserves/Retained earnings as per last
audited Balance Sheet/Financial Statement
iii) Intangible assets, if any
b) Exports to India
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iii) Particulars of the proposed Liaison/ Branch Office:
c) Phone number
d) E-mail ID
iii) E-mail ID
6. Any other information which the applicant company
wishes to furnish in support of this application.
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DECLARATION
i) The particulars given above are true and correct to the best of our knowledge and
belief.
ii) Our activities in India would be confined to the activities indicated in column 4(iii) (a)
above.
iii) If we shift the office to another place within the city, we shall intimate the designated
AD Category - I bank and the Reserve Bank. In the event of shifting the Office to
any other city in India, prior approval of the Reserve Bank will be obtained.
iv) We will abide by the terms and conditions that may be stipulated by the Government
of India / Reserve Bank / designated AD Category - I bank from time to time.
v) We, hereby commit that we are agreeable to a report / opinion sought from our
bankers abroad by the Government of India /Reserve Bank.
vi) We understand that the approval, if granted, is from FEMA angle only. Any other
approvals / clearances, statutory or otherwise, required from any other Government
Authority/ Department/ Ministry will be obtained before commencement of
operations in India.
vii) We have no objection to the Reserve Bank placing the details of approval in public
domain.
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3. Bankers' Report from the applicant’s banker in the host country / country of
registration showing the number of years the applicant has had banking relations
with that bank.
Name:
Designation:
Place:
Date:
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Annex 2
Dear Sir,
You may kindly refer to the application made by our subsidiary / group company,
M/s_____________________________to your office for establishing Branch / Liaison
Office in India.
3. We are also enclosing the financial background of our company in the form of our
latest Audited Balance Sheet / Account Statement certified by a Certified Public
Accountant.
Yours faithfully,
( )
Authorised Representative of the parent company
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Format of Report to DG of Police
Annex 3
a. Name
b. Address
c. Date and Place of Incorporation
d. E-mail ID or Web address
a. Name
b. Nationality
c. Designation
d. Address
e. Passport Particulars
a. Passport Number
f. E-mail address
g. Land Lime Number
h. Mobile Number
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Foreigners
Sl.No. Name Parentage Nationality Age E-mail & Passport Desgn./ Date of
Mobile & Visa Entry
Particular Particulars into
Profession
India
and
Place
of stay
Indians
7. List of foreigners other than employees who visited Indian Office in connection with the activities of the
company , with details.
Sl.No Name Parentage Nationality Age Purpose Designation / Date of visit /
of visit Profession Place of stay in
India
8. Projects / Contracts / Collaborations worked upon or initiated during the year alongwith details
Sl.No Name of Name of Nature of Approx. Place / Period Approx.
Project/Contract/Collaboration Indian Business value of Area of of number of
partner Activity Project / project / Project foreign work
Work Work / work force
required in
India
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12 Details of contact with Government Departments / PSUs including names of officials
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Annex 4
This is to certify and confirm that during the period from __________________to
________________, the Branch/Liaison Office/s with PAN No. ----------------------
of M/s__________________ (UIN- ) has/ have undertaken only those activities
that have been specifically permitted by the Reserve Bank vide its approval
letter/s No/s. ______________________________dated
______________and has/have complied with the terms and conditions specified
in the above mentioned letter/s.
_______________________________
(Signature of the Auditor/s)
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Appendix
Note: It is clarified for the information of all users that the Master Circular need not
necessarily be exhaustive and a reference to the relevant A.P. (DIR Series) Circular is
needed, wherever further information/clarification is required.
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