It becomes feasible for a foreign company to run their business in India; all they have to do is register a branch. The approval for the branch office registration is given by Reserve Bank of India through AD category 1 Banker and additional registration of the foreign company with the ROC. A branch office of a foreign company is considered as a foreign entity.
With the opening of a branch office foreign company enjoys the liberty of operating full-fledged business in India. BO is authorized to carry the similar trading activities as conducted by the Head Company or group companies. Though, when it comes to manufacturing activities BO is restricted. A branch office directly cannot conduct manufacturing activities though it has the authority to sub-contract these activities to an Indian manufacturer.
Activities that Branch Office can perform
- It can conduct import & export of goods
- Provide professional and consultant services
- To conduct research activity in all those spheres where parent company is already actively involved
- Boosting technical/financial collaboration on behalf of the parent company
- Working as a representative of a parent company in India and performing work of a buying/selling agent
- Delivering IT services and developing software in India
- Indulging in the service of technical support for the products supplied by the parent company
- To work as an approved representative for a foreign shipping or airline company in India
Important Points to Consider Before Applying for Branch Office Registration
The name of the Branch Office must be similar to that of the parent company. Below is the list of other crucial facts that one should keep in mind before applying for branch office registration:
Net Worth Requirement
It is necessary for a foreign parent company to have a beneficial track record of the past five working years in a row with the net worth of more than $ 1, 00,000 aptly mentioned in the financial statement.
Profit Remittance Allowed
The amount of profit earned by the branch office can be remitted from India to the parent company once the payment of all taxes is cleared and audit of all books of accounts is done.
Name Of Brach Office
It is necessary for a branch office to share the same name as of a parent company.
Taxation In India
The income tax applicable on the profits of the branch office of the foreign parent company in India is 40%, surcharges are also applicable. GST is imposed on the supply of goods and services.
List of Documents Required for Branch Office Registration
Exact and accurate documentation plays a crucial role in the process of Branch Office registration. Documents have to be latest and eligible.
Documents Required From Parent Company
- Certificate of Incorporation
- Memorandum of Association
- Articles of Association
- Complete details of Directors and Key Executives of the company
- Complete details of the shareholders of the applicant company
- Net worth certificate attested by Certified Public Accountant (CPA)
- Last five preceding year’s audited financial statement
- A report from applicant’s banker in the host country
Documents Required For The Company Registered Address
- 5 copies of passport
- 5 passport size photographs
- A copy of Business Visa with Immigration Stamp of arrival on it
- 5 copies of National Identity Card
- Latest Address Proof (Electricity Bill/ Phone Bill/ Water Bill/ Bank Statement)
- Power of Attorney in the name of AR
- Board Resolution appointing the AR
Eligibility Criteria for Branch Office Registration in India
It is the responsibility of Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016 to finalize the establishment place for a foreign company’s business in India.
For Setting Up Branch Office In India It Is Necessary For The Company To Fall Under The Following Criteria:
- The net worth of the foreign parent company should be above $ 1,00,000
- The company must have a profitability track record of the past five years.
- The company is restricted to perform the following activities:
- 1. It can conduct import & export of goods
- 2. Provide professional and consultant services
- 3. To conduct research activity in all those spheres where parent company is already actively involved
- 4. Boosting technical/financial collaboration on behalf of the parent company
- 5. Working as a representative of a parent company in India and performing work of a buying/selling agent
- 6. Delivering IT services and developing software in India
- 7. Indulging in the service of technical support for the products supplied by the parent company
- 8. To work as an approved representative for a foreign shipping or airline company in India
Drafting of Government Forms and Documents
On receiving the complete set of authentic documents the next step is to draft following documents for signature purpose by the applicant company and the authorised signatory
- Board Resolution allowing the starting of branch office in India
- A declaration given by the applicant on the eligibility of FDI and source of fund
- A declaration regarding the nature of the activity that business will conduct, the location of the activity of proposed BO
- A declaration regarding the nature of the activity of the applicant company along with the location of activity of the applicant company
- Form FNC
- A letter of comfort from holding company
Branch Office Registration Process in India
Application For Digital Signature Of Authorised Signatory
In the digital world, digital holds equal importance as that of a paper signature. They are considered no different from a physical or paper signature. New process of application filing to the registrar of companies is done in digital format. To authenticate the process of application filling digital signature is required of the proposed shareholders and directors.
Filing Of Application With RBI Through AD Bank
Branch office application for a foreign company is filed in FNC. The application is filed to the Reserve Bank of India via AD Bank (Authorised Dealer). The AD bank has an important role since all the communication to the RBI is dispelled through them.
Verification Of KYC From Banker Of Parent Company
A request pertaining to the scrutiny of documents is sent to the foreign company’s banker. This process of sending request for the purpose of verification is also called swift based verification. Once the documents are confirmed from the foreign banker the application is preceded for the approval purpose. The RBI/AD can also ask for the additional documents as the case may be.
Approval Of RBI For Branch Office Registration In India
A specific policy is followed for approving the branch office in India by the AD Banker itself. Priority is given to the cases where automatic route is not available.
Registration Of Branch Office With ROC
Once the approval is received from RBI for the establishment of Branch Office in India, an application is filed in form FC-1 for branch office registration of the foreign company within 30 days of such approval. DIN is required in case of any Indian director and the digital signature is needed of the authorised signatory for the purpose of e-filing statutory forms with the ROC.
PAN Card, Tax Deduction Number And Bank Account Opening
Income Tax department of India issues a unique 10 digit number, known as PAN number. Once the PAN number is obtained, the branch office is eligible to open its bank account. And it is necessary for every taxpayer to obtain Tax Deduction Account Number to obey all the TDS norms.
GST Registration & IEC
On obtaining Bank Account and cheque book the need arises for a copy of the check for making application for GST registration and Import Export Code.