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Branch Of Foreign Companies

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

  1. Export/Import of goods.
  2. Rendering professional or consultancy services.
  3. Carrying out research work, 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 agents in India.  
  6. Rendering services in Information Technology and development of software in India.
  7. Rendering technical support to the products supplied by the parent/ group companies.
  8. Foreign airline/shipping company.

A body corporate incorporated outside India (including a firm or other association of individuals), desirous of opening a Branch Office (BO) in India have to obtain permission from the Reserve Bank under provisions of FEMA 1999. The applications from such entities 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

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.
For Branch Office — not less than USD 100,000 or its equivalent.

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, subject to the condition that the parent company satisfies the eligibility criteria as prescribed above.

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

The BOs/LOs shall also obtain Permanent Account Number (PAN) from the Income Tax Authorities on setting up the offices in India.

Branch Office in Special Economic Zones (SEZs)

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.

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