Overview

Various international transactions involving Foreign Exchange requires the compliance with the Foreign Exchange Management Act (FEMA) or approval of various authorities before execution. We assist the clients in various FEMA compliances. We also assist our clients in identifying the approvals required and the authorities from which it is to be obtained; preparing the necessary documentation & applications for obtaining necessary approvals from authorities viz. Foreign Investment Promotion Boards (FIPB), Department of Industrial Policy & Promotion (DIPP), Secretariat for Industrial Assistance (SIA) & Reserve bank of India (RBI) etc. In case of any inadvertent contravention of the regulations under FEMA, we assist the entity in seeking compounding of such contravention.

Foreign Companies can set up their operations in India through:

  • Liaison Office/Representative Office
  • Project Office
  • Branch Office

Such offices can undertake any permitted activities. Companies have to register themselves with Registrar of Companies.

Liaison/Representative Office

Liaison office acts as a channel of communication between the principal place of business or head office and entities in India. Liaison office can not undertake any commercial activity directly or indirectly and cannot, therefore, earn any income in India. Its role is limited to collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers. It can promote export/import from/to India and also facilitate technical/financial collaboration between parent company and companies in India. Approval for establishing a liaison office in India is granted by Reserve Bank of India (RBI). Foreign insurance companies can establish liaison offices in India after obtaining approval from the IRDA, without specific approval from Reserve Bank of India.

Branch Office

Foreign Companies are allowed to set up Branch Offices in India. Permission for setting up branch offices is granted by the Reserve Bank of India (RBI).

Foreign Companies engaged in manufacturing and trading activities abroad are allowed to set up Branch Offices in India for the following purposes:

  • Export/Import of goods.
  • Rendering professional or consultancy services.
  • Carrying out research work, in which the parent company is engaged.
  • Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
  • Representing the parent company in India and acting as buying/selling agents in India.
  • Rendering services in Information Technology and development of software in India.
  • Rendering technical support to the products supplied by the parent/ group companies.
  • Foreign airline/shipping company.

A branch office is not allowed to carry out manufacturing (except within SEZ) or processing activities on its own but is permitted to subcontract these to an Indian manufacturer. Branch Offices established with the approval of RBI, may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines.

Branch Office on “Stand Alone Basis”

Such Branch Offices are isolated and restricted to the Special Economic zone (SEZ) alone and no business activity/transaction will be allowed outside the SEZs in India, which include branches/subsidiaries of its parent office in India.
No approval shall be necessary from RBI for a company to establish a branch/unit in SEZs to undertake manufacturing and service activities subject to specified conditions.

Project Office

Foreign Companies planning to execute specific projects in India can set up temporary project/site offices in India. RBI has now granted general permission to foreign entities to establish Project Offices subject to specified conditions.
Such offices can not undertake or carry on any activity other than the activity relating and incidental to execution of the project. Project Offices may remit outside India the surplus of the project on its completion, general permission for which has been granted by the RBI.
Like a branch office, a project office is also treated as an extention of foreign company and taxed at a higher rate applicable to foreign company.

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