Liaison/Branch Company Registration

Liaison/Branch Company Registration

A branch office can be registered after obtaining approval from the Reserve Bank of India (RBI). A branch office is a location where the business can be conducted. It is a place other than the main office. The branch office helps the clients in many ways.

Why register a liaison/branch office

Registering a branch office can help in many ways. It is useful for large companies to satisfy the needs and wants of customers.

The fact that India is a developing country makes it more attractive for investors to invest in India. Hence, we can see foreign companies operating in India through branch office registration. By opening a branch office is to expand the operations in India.

The branch office registration allows a foreign company to operate as a legal business entity in India. The branch office cannot carry manufacturing activities directly but it can carry those activities similar to its parent company.

Benefits of a liaison/branch office

Having a branch office has the following benefits and advantages:

    • Fascinate new customers: The branch office helps in attracting more new customers. Having a new portfolio, new product line, branch office helps in improving the customer base thereby helps in earning more profits.
    • Economies of scale can be achieved: By setting up a branch office, the volume of production is increased thus it reduces the per-unit cost of production and helps in achieving larger economies of scale and leads to more productivity. It also lowers the cost per unit on material, shipping, labour, and energy.
    • Brand value: The branch office set up in India maintains the brand value of its parent company. It runs its operation in the same name as the parent company.
    • Greater control: Parent companies control the branch offices. A branch office is a dependable company. Its activities are completely managed by the parent company.
  • Helps in expanding business recognition: Branch office helps in business recognition. By opening a branch office company the profitability can be increased and that reduces the business risk. It helps in testing the products in new markets and thus reduces the risk of doing business in that country.
  • Tax benefits: The branch office is a better choice if we compare the branch office with a subsidiary company because tax benefits can be availed by setting up a branch office.
  • Economical to open a branch office: It is cheaper to open a branch office as there is no share capital involved.
  • The branch office has to comply with the laws of the parent company. At first, this looks like a disadvantage, but it is actually an advantage for the branch office because the branch office has to operate as per the laws of the parent company.
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About the liaison/branch office registration

A branch office that is registered in India can conduct the export and import of goods. It can also provide professional and consultant services. Such branch offices can conduct research activities in every sphere where the parent company is involved.

A branch office is allowed to work as a representative of the parent company and is also allowed to develop the software in India and can deliver IT services. Such a company can also enter into financial collaboration on behalf of the parent company.

Requirements related to liaison/branch office registration

A branch office must have the same name as that of the parent company. The foreign company must have a track record of five years of a net worth of more than $1,00,000 dollars (One lakhs United States dollars) duly supported by the financial statements.

The profits earned by the branch company can be remitted from India to the parent company but for this, all the tax-related and audit-related compliance should be done. The profits of the branch office are taxable under the Income Tax Act, 1961. The tax rate is 40% for the branch offices of a foreign parent company. Also, GST is levied on the supply of goods and services by the branch office.

The branch office has to comply with the filing requirements of MCA as well as ROC and the income tax department. The registration timeline is 3 to 4 weeks, however, it may differ from case to case.

Procedure to register a liaison/branch office

Following is the procedure to be followed by to register as a branch office:

    1. Filing an application with the RBI through an authorised dealer.
      1. To file an application in FNC for a branch office of a foreign company. The application is to be filed to the RBI through an authorised dealer bank. The authorised dealer bank is responsible for all the communications.
    2. Approval from the Reserve Bank of India in certain cases:
      1. The entities that walk in the sector where 100% FDI is allowed to get an automated route, but in certain cases, prior approval is required.
      2. When the applicant company is a citizen of Pakistan, Afghanistan, Iran, China, Bangladesh, Sri Lanka and Hong Kong.
      3. When the principal business activities fall in the four sectors namely defence, telecom, private security and information and broadcasting.
      4. When the applicant is an NGO.
    3. KYC Verification from the banker of the parent company:
      1. The documents are scrutinized by the foreign banker, the application is then further processed for approval purposes.
    4. Approval from RBI for the branch office registration in India.
      1. Approval from RBI is required. Priority is given to the cases where an automatic route is not available.
    5. Registration of branch office with ROC:
      1. Once the approval from RBI is received an application is filed in the prescribed form within 30 days of such approver.
    6. PAN card, tax deduction number and bank account opening:
      1. The income tax department issues a unique 10 digit number called TAN after obtaining the PAN. The branch office shall open its bank account and shall comply with the provisions of the TDS.
    7. GST registration:
      1. GST registration is required for the import and export of goods and services.

Documents required for liaison/branch office registration

  • Following are the documents required for the registration purposes:

    1. Documents from the parent company
      1. Certificate of incorporation
      2. MOA and AOA
      3. Full details of the directors
      4. Full details of the shareholders
      5. Last five years audited financial statement
      6. Report from applicant’s bank.
    2. Documents for the office address registration
      1. 5 copies of passport
      2. 5 passport size photographs
      3. Latest address proof
      4. 5 copies of national identity card
    3. Drafting documents and forms of government
      1. Board resolution that allows setting up a branch office in India
      2. Declaration regarding the nature of activities of the business.
      3. Declaration by application regarding the eligibility of FDI
      4. Form FNC
      5. A letter of comfort from the parent company.

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