PROJECT OFFICE/ LIAISON OFFICE/ BRANCH OFFICE IN INDIA

 

 

INTRODUCTION

 

Being a developing nation, Indian Economy is growing at a remarkable pace which fascinates foreign entities and business organizations to enter into Indian Market and grasp the opportunity. Doing business in India has several advantages because of its development friendly reforms.

 

A physical presence is always necessary to make an impact on others. Therefore, the foreign entities can enter into Indian Market by setting up a Project Office/ Branch Office/ Liaison Office as per their need and requirement. Indian market and Government policies make it viable for a business enthusiast to start one’s endeavour of setting up a company. A foreign company can establish business operations in India without creating and registering a subsidiary company. Therefore, The RBI has issued various guidelines regarding establishment of Project Office/ Liaison Office/ Branch office with the aim to facilitate ease in doing business in India.

 

MEANINGS

 

  1. Project Office: A project office enables organizations to more effectively establish an enterprise-wide project management practice. It is a unit or establishment that exists to support the accomplishment of a particular project of the business organization in that area. A project office is a temporary unit that exists only for the duration of a project and discontinued afterwards.

 

  1. Liaison Office: Liaison office means a representative office of a foreign company who act as a link to assist in communication between the principal place of business or Head Office and entities in India. A Liaison office does not undertake any such business activity which in return generates an income for the company. Its sole purpose is to act as a representative of the foreign company.

 

  1. Branch Office: A branch office simply means a different location for an organization to widespread its business activities. It conducts the business operations in a country other than the one in which the company headquarter exists. It does not constitute a separate legal activity; rather it is an outlet of a company.

 

 

 

RBI GUIDELINES ON ESTABLISHMENT OF PROJECT OFFICE/ LIAISON OFFICE/ BRANCH OFFICE IN INDIA

 

A body corporate, firm or other association of individuals incorporated outside India, 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 will be considered by Reserve Bank under two routes:

 

  1. 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.

 

  1. 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.

 

 

BRANCH OFFICE:

 

Conditions forthwith for setting up Branch Office:

 

  • a profit making track record during the immediately preceding 5 financial years in the home country.`

 

  • Net Worth not less than USD 100,000 or its equivalent.

 

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].

 

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.

 

 

 

 

Application For Establishing Branch Offices

 

The application for establishing Branch Offices in India should be forwarded by the foreign entity through a designated AD Category – I bank to the General Manager, Foreign Exchange Department, Central Office Cell, Reserve Bank of India, New Delhi Regional Office, 6, Parliament Street, New Delhi-110 001, India, 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.

 

Permissible Activities

 

  1. Export / Import of goods.
  2. Rendering professional or consultancy services.
  3. Carrying out research work, in areas in which the parent company is engaged.
  4. Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
  5. Representing the parent company in India and acting as buying / selling agent in India.
  6. Rendering services in information technology and development of software in India.
  7. Rendering technical support to the products supplied by parent/group companies.
  8. Foreign airline / shipping company.

 

Restriction/ Limitation on Activities:

 

  1. Retail trading activities of any nature is not allowed for a Branch Office in India.
  2. A Branch Office is not allowed to carry out manufacturing or processing activities in India, directly or indirectly.
  3. Profits earned by the Branch Offices are freely remittable from India, subject to payment of applicable taxes.

 

Branch Office in Special Economic Zones (SEZs)

 

  1. Reserve Bank has given general permission to foreign companies for establishing branch/unit in Special Economic Zones (SEZs) to undertake manufacturing and service activities. The general permission is subject to the following conditions:

 

  • such units are functioning in those sectors where 100 per cent FDI is permitted;
  • such units comply with part XI of the Companies Act,1956 (Section 592 to 602);
  • such units function on a stand-alone basis.

 

  1. 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.

 

Branches of foreign banks

 

Foreign banks do not require separate approval under FEMA, for opening branch office in India. Such banks are, however, required to obtain necessary approval under the provisions of the Banking Regulation Act, 1949, from Department of Banking Regulation, Reserve Bank.

 

 

LIAISON OFFICE

 

Conditions forthwith for setting up Liaison Office:

 

  • a profit making track record during the immediately preceding 3 financial years in the home country.

 

  • Net Worth not less than USD 50,000 or its equivalent

 

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].

 

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.

 

 

Application for establishing Liaison Office

 

The application for establishing Liaison Office in India should be forwarded by the foreign entity through a designated AD Category – I bank to the General Manager, Foreign Exchange Department, Central Office Cell, Reserve Bank of India, New Delhi Regional Office, 6, Parliament Street, New Delhi-110 001, India, 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.

 

 

Permissible Activities

 

  1. Representing in India the parent company / group companies.
  2. Promoting export / import from / to India.
  3. Promoting technical/financial collaborations between parent/group companies and companies in India.
  4. Acting as a communication channel between the parent company and Indian companies.

 

Restriction/ Limitation on Activities:

 

  1. It is not allowed to undertake any business activity in India and cannot earn any income in India.
  2. Expenses of such offices are to be met entirely through inward remittances of foreign exchange from the Head Office outside India.
  3. The role of such offices is limited to collecting information about possible market opportunities and providing information about the company and its products to the prospective Indian customers.

 

Annual Activity To Be Carried Out By Liaison Office:

 

  1. Maintenance of books of account;
  2. Getting annual accounts audited;
  3. Filling of annual activity certificate with RBI;
  4. Filling of annual return and balance sheet with ROC;
  5. Intimating each and every change in the liaison office to RBI & ROC;
  6. No additional place of business can be started unless approval is taken from RBI.

 

Validity Of Permission Granted For Liaison Office

 

  • Initially, the permission to set up such liaison offices is granted for a period of 3 years.

 

  • The designated AD Category – I bank may extend the validity period for a period of 3 years from the date of expiry of the original approval granted by the Reserve Bank on fulfillment of the prescribed conditions.
  • The LO should have submitted the Annual Activity Certificates for the previous years;

 

  • The account of the LO maintained with the designated AD Category – I bank is being operated in accordance with the terms and conditions stipulated in the approval.

 

Such extension has to be granted within a period of 1 month from the receipt of the request under intimation to the Regional Office concerned of the Reserve Bank and to the General Manager, Foreign Exchange Department, Central Office Cell, Reserve Bank of India, New Delhi quoting the reference number of the original approval letter and the UIN.

 

Liaison Office Of Foreign Insurance Companies / Banks

 

Foreign insurance companies can establish Liaison Offices in India only after obtaining approval from the Insurance Regulatory and Development Authority (IRDA).

 

Foreign banks can establish Liaison Offices in India only after obtaining approval from the Department of Banking Regulation (DBR), RBI.

 

 

PROJECT OFFICE

 

General Features Of Project Office:

 

  • Profits earned by a project office can be repatriated after completion of the project;

 

  • It is also treated as an extension of a foreign company in India and taxed at the rate applicable to foreign companies;

 

  • Foreign companies planning to execute specific projects in India can set up temporary project/ site offices in India.

 

  • It cannot undertake or carry on any activity other than the activity relating and incidental to execution of the project.

 

 

 

Procedure For Setting Up Project Office:

 

Reserve Bank has granted general permission to foreign companies to establish Project Offices in India, provided they have secured a contract from an Indian company to execute a project in India, and;

 

  1. the project is funded directly by inward remittance from abroad; or

 

  1. the project is funded by a bilateral or multilateral International Financing Agency; or

 

  1. the project has been cleared by an appropriate authority; or

 

  1. 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.

 

 

Project Offices by Foreign Non-Government Organisations/Non-Profit Organisations/Foreign Government Bodies/Departments

 

Setting up of Project Offices by such entities are under the Government Route. Accordingly, they are required to apply to the Reserve Bank for prior permission to establish an office in India, whether Project Office or otherwise.

 

 

Opening of Foreign Currency Account

 

AD Category – I banks can open non-interest bearing Foreign Currency Account for Project Offices in India subject to the following:

 

  1. The Project Office has been established in India, with the general / specific permission of Reserve Bank, having the requisite approval from the concerned Project Sanctioning Authority concerned.

 

  1. The contract, under which the project has been sanctioned, specifically provides for payment in foreign currency.

 

  1. Each Project Office can open two Foreign Currency Accounts, usually one denominated in USD and other in home currency, provided both are maintained with the same AD category–I bank.

 

  1. The permissible debits to the account shall be payment of project related expenditure and credits shall be foreign currency receipts from the Project Sanctioning Authority, and remittances from parent/group company abroad or bilateral / multilateral international financing agency.

 

  1. The responsibility of ensuring that only the approved debits and credits are allowed in the Foreign Currency Account shall rest solely with the branch concerned of the AD. Further, the Accounts shall be subject to 100 per cent scrutiny by the Concurrent Auditor of the respective AD banks.

 

  1. The Foreign Currency accounts have to be closed at the completion of the Project.

 

 

Intermittent remittances by Project Offices in India

 

  1. 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:

 

  1. 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.

 

  1. 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.

 

  1. 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.

 

 

 

 

 

 

 

RIGHTS WITH RBI

 

The Reserve Bank or the Government of India as the case may be, reserves;

 

  • the right to reject an application for non-fulfilment of any other condition/s not specifically referred above, fulfilment of which, in the opinion of the Reserve Bank / the Government of India, is necessary for grant of such permission or in the public interest.

 

  • the right to verify / examine the activities of the BO / LO of the foreign entities established in India and to withdraw the permission already granted, after due notice, if the circumstances so warrant or due to changes in the policy.

 

 

APPLICATION TO UNDERTAKE ADDITIONAL ACTIVITIES

 

Requests for undertaking activities in addition to what has been permitted initially by the Reserve Bank may be submitted through the designated AD Category -I bank to the Reserve Bank of India, justifying the need with comments of the designated AD Category – I bank.

 

 

APPLICATION TO UNDERTAKE ADDITIONAL BRANCH / LIAISON OFFICES

 

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.

 

  • 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.

 

 

 

 

COMPLIANCES UNDER FOREIGN EXCHANGE MANAGEMENT ACT (FEMA) 1999

 

Annual Activity Certificate (AAC):

 

After establishment, all new entities setting up LO/BO/PO shall submit a report containing information, as per format provided in Annex 3 within five working days of the LO/BO becoming functional to the Director General of Police (DGP) of the state concerned in which LO/BO has established its office.

 

The branch office/liaison office may submit the Annual Activity Certificate in prescribed format as at the end of March 31 along with the audited financial statements including receipt and payment account on or before September 30 of that year. In case the annual accounts of the office are finalized with reference to a date other than March 31, the AAC along with the audited financial statements may be submitted within six months from the due date of the Balance Sheets to the Authorised Dealer Category-bank and the Director General of Income Tax (International Taxation), Drum Shape Building, I.P. Estate, New Delhi 110002.

 

AAC from a Chartered Accountant showing the project status and certifying that the accounts of the project office have been audited and the activities undertaken are in conformity with the general/ specific permission given by the Reserve Bank may be submitted by the project office to the designated Authorised Dealer Category-I bank.

 

 

GENERAL GUIDANCE NOTES:

 

  • A BO/LO/PO or any other place of business by whatever name called is required to register with the Registrar of Companies (ROCs) once it establishes a place of business in India if such registration is required under the Companies Act, 2013.

 

  • The BOs / LOs shall obtain Permanent Account Number (PAN) from the Income Tax Authorities on setting up of their office in India and report the same in the AACs.

 

  • The Branch / Liaison offices established with the Reserve Bank’s approval will be allotted a Unique Identification Number (UIN).

 

  • Each BO/ LO/PO are required to transact through one designated AD Category-I bank only who shall be responsible for the due diligence and KYC norms of the BO/LO/PO.

 

  • BO/LO/PO, present in multiple locations, is required to transact through their designated AD. However, the AD of the nodal office is required to comply with all the reporting norms.

 

  • BO/LO/PO can change their existing AD Category-I bank subject to both the AD banks giving consent in writing for the transfer and the transferring AD bank confirming submission of all AACs and absence of any adverse features in conducting the account by the BO/LO/PO.

 

 

 

ROC COMPLIANCE (MINISTRY OF CORPORATE AFFAIRS)

 

Section 2(42) under Companies Act, 2013 defines Foreign Company as “any company or body corporate incorporated outside India which,—

 

(a) has a place of business in India whether by itself or through an agent, physically or through electronic mode; and

 

(b) conducts any business activity in India in any other manner.”

 

Rule 2 (c) of the Companies (Registration of Foreign Companies) Rules, 2014 defines ‘electronic mode’ as carrying out electronically based, whether main server is installed in India or not, including but not limited to-

 

  • Business to business and business to consumer transactions, data interchange and other digital supply transactions;
  • offering to accept deposits or inviting deposits or accepting deposits or subscriptions in securities in India or from citizens of India;
  • financial settlements, web based marketing, advisory and transactional services, database services and products, supply chain management;
  • online services such as telemarketing, telecommuting, telemedicine, education and information research; and
  • all related data communication services.

 

These transactions may be conducted by e-mail, mobile devices, social media, cloud computing, document management, voice or data transmission or otherwise.

 

 

 

 

Compliances for Foreign Companies under Companies Act, 2013 and rules made thereunder:

 

Chapter XXII

Companies (Registration of Foreign Companies) Rules, 2014

 

Section 380: Documents etc., to be delivered to Registrar by Foreign Companies:

 

  • Every foreign company shall, within 30 days of the establishment of its place of business in India, deliver to the Registrar for registration—
  1. A certified copy of the charter, statutes or memorandum and articles, of the company or other instrument constituting or defining the constitution of the company and, if the instrument is not in the English language, a certified translation thereof in the English language;
  2. The full address of the registered or principal office of the company;
  3. A list of the directors and secretary of the company containing such particulars as may be prescribed;
  4. The name and address or the names and addresses of one or more persons resident in India authorized to accept on behalf of the company service of process and any notices or other documents required to be served on the company;
  5. The full address of the office of the company in India which is deemed to be its principal place of business in India;
  6. Particulars of opening and closing of a place of business in India on earlier occasion or occasions;
  7. Declaration that none of the directors of the company or the authorized representative in India has ever been convicted or debarred from formation of companies and management in India or abroad; and
  8. Any other information as may be prescribed.

 

 

  • Where any alteration is made or occurs in the documents delivered to the Registrar under this section, the foreign company shall, within thirty days of such alteration, deliver to the Registrar for registration, a return containing the particulars of the alteration in the prescribed form.

 

Rule 3(3):

  • For the purposes of clause (h) of sub-section (1) of section 380, a foreign company shall, within thirty days of the establishment of its place of business in India, file with the Registrar Form No. FC-1 with such fee as provided in Annexure ‘B’ and with the documents required to be delivered for registration by a foreign company in accordance with the provisions of sub-section (1) of section 380. The application shall also be supported with an attested copy of approval from Reserve Bank of India under FEMA Regulations and also from other regulators, if any, approval is required by such Foreign Company to establish a place of business in India or a declaration from the authorized representative of such Foreign Company that no such approval is required.

 

Rule 3(4):

For the purposes of sub-section (3) of section 380, where any alteration is made or occurs in the document delivered to the Registrar for registration under sub-section (1) of section 380, the foreign company shall file with the Registrar, a return in Form No. FC-2 along with the fee as provided in Annexure ‘B’ containing the particulars of the alteration, within thirty days from the date on which the alteration was made or occurred.

 

Section 381: Accounts of Foreign Companies:

 

  • Every foreign company shall, in every calendar year,—
  1. Make out a balance sheet and profit and loss account in such form, containing such particulars and including or having annexed or attached thereto such documents as may be prescribed; and
  2. Deliver a copy of those documents to the Registrar: Provided that the Central Government may, by notification, direct that, in the case of any foreign company or class of foreign companies, the requirements of clause (a) shall not apply, or shall apply subject to such exceptions and modifications as may be specified in that notification.

 

  • If any such document as is mentioned in sub-section (1) is not in the English language, there shall be annexed to it a certified translation thereof in the English language.

 

  • Every foreign company shall send to the Registrar along with the documents required to be delivered to him under sub-section (1), a copy of a list in the prescribed form of all places of business established by the company in India as at the date with reference to which the balance sheet referred to in sub-section (1) is made out.

 

Rule 4:

 

  • For the purposes of clause (a) of sub-section (1) of section 381, every foreign company shall prepare financial statement of its Indian business operations in accordance with Schedule III or as near thereto as may be possible for each financial year including:
  1. Documents required to be annexed thereto in accordance with the provisions of Chapter IX of the Act;
  2. documents relating to copies of latest consolidated financial statements of the parent foreign company , as submitted by it to the prescribed authority in the country of its incorporation under the provisions of the law in that country:

 

Provided that where such documents are not in English language, there shall be annexed to it a certified translation thereof in the English language:

 

Provided further that where under proviso to sub-section (1) of section 381, the Central Government has exempted or prescribed different documents for any foreign company or a class of foreign companies, then documents as prescribed shall be submitted.

 

  • Such other documents as may be required to be annexed or attached in accordance with sub-rule (2).

 

  • Every foreign company shall, along with the financial statement required to be filed with the Registrar, annex or attach thereto the following documents:

 

  1. Statement of Related party transaction, which shall include:
  2. Names of the person in India which shall be deemed to be the related party within the meaning of clause 76 of section 2 of the Act, of the foreign company or of any subsidiary or holding company of such foreign company or of any firm in which such foreign company or its subsidiary or holding company is a partner;
  3. Nature of such relationship;
  • Description and nature of transaction;
  1. amount of such transaction during the year with opening ,closing, highest and lowest balance during the year and provisions made (if any) in respect of such transactions;
  2. Reason of such transaction;
  3. Material effect of such transaction on both the parties;
  • Amount written off or written back in respect of dues from or to the related parties;
  • A declaration that such transactions were carried out at arm’s length basis;
  1. Any other details of the transaction necessary to understand the financial impact.

 

  1. Statement of Repatriation of profits which shall include:
  2. Amount of profits repatriated during the year;
  3. Recipients of the repatriation;
  • Form of repatriation;
  1. Dates of repatriation;
  2. Details if repatriation made to a jurisdiction other than the residence of the beneficiary;
  3. Mode of repatriation; and
  • Approval of Reserve Bank of India or any other authority, if any.

 

  1. Statement of transfer of funds (including dividends if any) which shall, in relation of any fund transfer between place of business of foreign company in India and any other related party of the foreign company outside India including its holding, subsidiary and associate company, include:
  2. Date of such transfer;
  3. Amount of fund transferred or received;
  • Mode of receipt or transfer of fund;
  1. Purpose of such receipt or transfer; and
  2. Approval of Reserve Bank of India or any other authority, if any.

 

  • The documents referred to in this rule shall be delivered to the Registrar within a period of six months of the close of the financial year of the foreign company to which the documents relate:

Provided that the Registrar may, for any special reason, and on application made in writing by the foreign company concerned, extend the said period by a period not exceeding three months.

 

Rule 5:

  • Every foreign company shall get its accounts pertaining to the Indian business operations prepared in accordance with the requirements of clause (a) of sub-section (1) of section 381 and rule 4, audited by a practicing Chartered Accountant in India or a firm or limited liability partnership of practicing chartered accountants.
  • The provisions of Chapter X and rules made there under, as far as applicable, shall apply mutatis mutandis to the foreign company.

 

Rule 6:

For the purposes of sub-section (3) of section 381, every foreign company shall file to the Registrar, along with the financial statement, in Form No. FC-3 along with such fee as provided in Annexure to Companies (Registration Offices and Fees) Rules, 2014 a list of all the places of business established by the foreign company in India as on the date of balance sheet.

 

Section 382: Display of Name of Foreign Companies:

 

Every Foreign Company is required to exhibit outside its every office or place of business in India, and in all business letters, bill heads and letter paper, and in all notices, and other official publications, the name of the company and the country where it is incorporated. The name shall be in legible letters of English language and also in the local language of the state where such office is situated.

 

Besides the name and the country of Incorporation, the company is also required to mention the fact that the liability of the company is limited if it is so.

 

Section 383: Service on Foreign Company:

 

Any process, notice, or other document required to be served on a foreign company shall be addressed to the person whose name and address have been delivered to the Registrar and sent by post or by electronic mode. The documents on Foreign Company as per the New Act may now also be served by Electronic Mode.

 

Section 384: Debentures, Annual Return, Registration of Charges, Books of Accounts and their Inspection

 

Debentures:

The provisions of Section 71 shall apply mutatis mutandis to a foreign company.

 

Annual Return:

The provisions of Section 92 shall subject to such exceptions, modification and adaptations as may be made therein by rules made under this act, apply to a foreign company as they apply to a foreign company as they apply to a company incorporated in India.

 

Also, Rule 7 provides that every foreign company shall prepare and file, within a period of sixty days from the last day of its financial year, to the Registrar annual return in Form FC.4 along with such fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 containing the particulars as they stood on the close of the financial year.

 

Books of Accounts:

The provisions of Section 128 shall apply to a foreign company to the extent of requiring it to keep at its principal place of business in India, the books of account referred to in that section, with respect to monies received and spent, sales and purchases made, and assets and liabilities, in the course of or in relation to its business in India.

 

Registration of Charges:

Companies Act 2013: The provisions of Chapter VI shall apply mutatis mutandis to charges on properties which are created or acquired by any foreign company. As per Section 384 read with Section 77 of the Companies Act 2013 charges on properties which are created or acquired by any Foreign Companies whether situated in or outside India shall be registered with Registrar. Under Companies Act 2013 properties need not be situated in India. Foreign Companies shall register charges on properties which are created or acquired by Foreign Companies whether situated in or outside India with Registrar.

 

Inspection:

The provisions of Chapter XIV shall apply mutatis mutandis to the Indian business of a foreign company as they apply to a company incorporated in India.

 

Rule7:

For the purposes of sub-section (2) of section 384, every foreign company shall prepare and file, within sixty days from the last day of its financial year, to the Registrar annual return in Form FC-4 along with such fee as provided in Annexure to Companies (Registration Offices and Fees) Rules, 2014 containing the particulars as they stood on the close of the financial year.

 

 

Forms Filed to fulfill the provisions of Companies Act 2013, and rules thereunder:

 

  1. FORM FC-1:

Information to be filed by foreign company

 

Attachments Required:-

  • Certified copy of the charter, statutes, or memorandum and articles of the company or other instrument constituting or defining the constitution of the company
  • List of directors and secretary of the foreign company
  • Power of attorney or board resolution in favor of the authorized representative(s)
  • Reserve bank of India approval letter (It is mandatory to attach attested copy of such approval).
  • Copy of permission letter of other Authority(s)/Regulator(s), if any is required to be attached.
  • It is mandatory to attach following in case number entered is more than seven of respective field: 1. Particulars of the persons covered u/s 379
  1. Details of the places of business other than principal place of business in India

 

  • Details of the places of business established at any earlier occasion(s)
  • Particulars of the authorized representatives
  • Interest of authorized person(s) in other entities
  • Particulars of subsidiary, holding or associate companies of the foreign company in India
  • Particulars of related party of the foreign company

 

Any other information can be provided as an optional attachment and if the document attached is not in English, then a certified translation in English language has to be attached.

  1. FORM FC-2 :

Return of alteration in the documents filed for registration by foreign company

 

Attachments Required:-

  • Certified true copy of the Board resolution, if any
  • Copy of the general meeting resolution
  • Copy of approval letter Translated version of the documents in English (in case documents attached are not in English).
  • Particulars of alterations in the place of business in India of the company
  • Particulars of alteration in details of the directors or secretaries
  • Particulars of alterations in details of the company authorized representative

 

Any other information can be provided as an optional attachment(s).

 

  1. FORM FC-3 :

Annual accounts along with the list of all principal places of business in India established by foreign company

 

Attachments Required:-

  • Copy of latest consolidated financial statement of parent company
  • Copy of balance sheet and profit and loss account duly authenticated under section 381(1)
  • Statement of related party transactions
  • Statement of repatriation of profits
  • Statement of transfer of funds
  • Approval letter obtained for every establishment in India by a foreign company
  • In case the document is in any other language other than English, certified translation in English language is mandatory
  • Any other information can be provided as an optional attachment(s).

 

 

 

  1. FORM FC-4:

Annual Return of a Foreign company

 

Attachments Required:-

  • Details of Promoters, Directors and Key managerial personnel and changes therein since close of previous financial year.
  • Details of directors and key managerial personnel and their remuneration. Details of the meeting of the members or class thereof, board and its various committees along with attendance details.
  • Particulars of members and debenture holders along with changes therein since the close of previous financial year.
  • Particulars of Holding, subsidiary and associate companies and firms. (Mandatory in case number of entities prescribed at serial no 6 is more than seven)
  • Details of Penalties / punishment/ Compounding of offences, if any.

 

Any other information can be provided as an optional attachment(s).

 

 

INCOME TAX COMPLIANCE

 

 

Foreign Income

 

Foreign income means any income which is neither received or deemed to be received in India nor accrues or arises or deemed to accrue or arise in India i.e. income which accrues or arises or deemed to accrue or arise outside India and also received or deemed to be received outside India.

 

However it includes the following:

  • Business income where business is wholly and partly controlled in India.
  • Profession Income where profession was setup in India.
  • Business income where business was wholly controlled from outside India.
  • Profession Income where profession was set up outside India.
  • Any other income (Salary, rent and dividend).

 

Regarding foreign income it is always taxable in case of R/ROR but never taxable in case of NR but taxable in case of RNOR in exceptional cases i.e. when it is business income and the business is controlled in India or when it is Profession Income where profession was set up in India.

 

According to section 6(3) of income tax act 1961 a company is said to be resident in India in any previous year, if:

 

(i) It is an Indian company; or

 

(ii) During that year, the control and management of its affairs is situated wholly in India.

 

For deciding the residential a status of a company, a company is of two types

 

(i) Indian Company- always resident in India irrespective of control and management of its business affairs

 

(ii) Foreign Company – resident in India if its place of effective management (POEM) is in India. For this purpose, POEM means where key management and commercial decisions that are necessary for the conduct of business of an entity as a whole are in substance mode.

 

Taxation Of Foreign Income In India

 

Companies resident in India are subject to Indian tax on their income, generally on an accrual basis, from all sources inside or outside India and whether or not remitted to India.

 

The income of all foreign branches is taxed in India as part of the Indian company’s worldwide taxable income. Similarly, the losses of all foreign branches are deductible in computing the worldwide taxable income. In computing the income or loss of a foreign branch, a deduction is generally allowed for all expenses incurred wholly and exclusively for the purpose of the business that are not of a capital or personal nature. Income is taxed whether or not repatriated. If the branch income incurs tax in the foreign country, credit is given in India to the extent of the lesser of the foreign tax paid or the Indian tax on the foreign income, either unilaterally or under treaty.