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Liaison Office Foreign Company

A foreign company can open a liaison office in India to look after its Indian operations, to promote its business interests, to spread awareness of the company's products and to explore further opportunities. Liaison offices are not allowed to carry on any business or earn any income in India and all expenses are to be borne by remittances from abroad.

A body corporate incorporated outside India (including a firm or other association of individuals), desirous of opening a Liaison Office 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 Organizations/Non-Profit Organizations/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 Liaison Office a profit making track record during the immediately preceding three financial years in the home country.

•  NetWorth  

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 Liaison Office — not less than USD 50,000 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, subject to the condition that the parent company satisfies the eligibility criteria as prescribed above.

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

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

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