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Branch Office

{for a foreign company intending to set up an office in India for undertaking permitted business/ commercial activity related to its business}

Price available on request- based on requirement

A Branch office is one of means by which a foreign company can set up its business presence in India. Unlike a liaison office, a Branch office can undertake business activities permitted by Reserve Bank of India. RBI exercises very strict control over branch offices in India.

 

 

Meaning

Companies incorporated outside India are allowed to set up Branch Offices in India with approval of the Reserve Bank. Such Branch Offices are permitted to represent the parent company in India and undertake permitted business activities and also earn income in India.

Expenses of a branch office are to be met either through inward remittances received from the Head office of the company situated outside India or through income earned from business operations in India.

Branch office is allowed to undertake only that business activity which is mentioned it its license granted by the Reserve Bank of India.

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Features of Branch office

  • governed by Reserve bank of India
  • name is similar to name of foreign company
  • can undertake permitted business or commercial activities
  • can earn income in India
  • profits earned are freely remittable from India, subject to payment of applicable taxes
  • expenses are met through funding received from foreign company or income earned in India

Permitted activities

The Branch office is allowed to undertake only those business activities which are permitted by Reserve Bank of India. The permitted business activity is mentioned in the permission granted by Reserve Bank of India. Usually, Branch offices are permitted to represent the foreign company and undertake following business activities in India-

  • export/ import of goods
  • rendering professional or consultancy services
  • carrying out research work in areas in which the parent company is engaged
  • promoting technical or financial collaborations between Indian companies and parent company
  • representing the parent company in India and acting as buying/ selling agent in India
  • rendering services in information technology and development of software in India
  • rendering technical support to the products supplied by parent company
  • foreign airline/ shipping company

Activities not permitted

  • any retail trading activities
  • manufacturing activity
  • processing activity(However, RBI has given general permission to foreign companies for establishing branch office in Special Economic Zones (SEZs) to undertake manufacturing and service activities subject to the following conditions)
  • such units are functioning in those sectors where 100% FDI is permitted
  • such units function on a stand-alone basis
  • such units comply with provisions of Companies Act 2013

Criteria for setting up a branch office

A company desirous of opening a Branch Office in India is required to obtain permission from the Reserve Bank of Bank. The criteria required for opening a branch office is as under-

Application

The application from a company intending to open a branch office is considered by RBI under two routes-
i. Automatic route- Where principal business of the foreign entity falls under any sector where 100% Foreign Direct Investment (FDI) is permitted under automatic route, approval is granted by RBI.                                                                      

ii. Government route- Where principal business of the foreign entity falls under any sector where 100% Foreign Direct Investment (FDI) is not permitted under automatic route and application is from non-government/ non-profit organizations/ government bodies, approval is granted by RBI with clearance from Ministry of Finance, Government of India.
The application for opening a branch office is required to be filed by the foreign entity before RBI through an authorized dealer (permitted by RBI) which is a bank.

Track record

The foreign company shall have a profit making track record during the immediately preceding five financial years in its home country.

Net Worth

The net worth of foreign company as per latest audited balance sheet or account statement certified by a practicing CA of home country shall not be less than USD 100,000 or its equivalent.

Package Inclusions

preparation of documents

submission of documents to AD

coordinating with AD regarding documents

submission of application to RBI

branch office approval

registration with MCA

Documents required

Please note that setting up of a branch office requires extensive documentation. Apart from english version of the Certificate of Incorporation/ Registration and Memorandum & Articles of Association attested by Indian Embassy/ Notary Public in the Country of Registration of parent company and Latest Audited Balance Sheet of the applicant entity, the exact documentation will be communicated on a case to case basis commensurate with the legal requirements. Apart from RBI, separate documents will be required for making application to MCA for registration of branch office.

Registration process

The process of incorporation of branch office will take time depending upon the correct and proper documents received and time taken by the RBI and MCA to register the BO. We will start the process once we receive the payment and correct documents. Once registration is complete and full payment is made, we will send you all the documents including certificate of incorporation.

 

FAQs on Branch office

What is meaning of branch activities?

It means undertaking of business activities of the foreign company in India by establishing a local place of business known as branch office. Branch activity is the activity carried on by the branch office in India, which is permitted by RBI and usually the one in which the parent company is engaged. 

Who is eligible to open a branch office in India?

A company registered in a foreign country can open a branch office in India for carrying out permitted activities. Further, the foreign company should have a profit making track record during immediately preceding 5 financial years in its home country and minimum net worth of USD 100,000 or its equivalent.

Whether companies in all foreign countries are allowed to open branch office in India?

All foreign companies are allowed to open branch office in India except companies registered in Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong kong or Macau. Companies registered in these countries need prior approval of RBI. Further, entities registered in Nepal are not allowed to establish branch office in India.

Who is the approving authority for a branch office in India?

Reserve Bank of India is the approving authority for branch offices in India. Applications for opening branch office are considered by RBI under two routes-

a. Automatic route- Where principal business of the foreign entity falls under any sector where 100% Foreign Direct Investment (FDI) is permitted under automatic route, approval is granted by RBI. 

b. Government route- Where principal business of the foreign entity falls under any sector where 100% Foreign Direct Investment (FDI) is not permitted under automatic route and application is from non-government/ non-profit organizations/ government bodies, approval is granted by RBI with clearance from Ministry of Finance, Government of India.

What is an Authorized dealer?

Authorized dealer is a bank/ entity authorized by the Reserve Bank of India to deal in foreign exchange/ currency or any other transaction as may be allowed. An application to open a branch office is required to be made to Reserve Bank of India through an Authorized dealer. Usually, an authorized dealer is a bank.

Whether companies which do not fulfil eligibility criteria can make an application?

Companies which 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.

Can a branch office make a request for undertaking any additional activity?

Yes, a branch office can make a request for undertaking activities in addition to what has been permitted initially by the Reserve Bank by making an application to RBI through an authorized dealer.

What is the role of authorized dealer in scrutiny of application?

The authorized dealer exercises due diligence in respect of the applicant’s background, antecedents of the promoter, nature and location of activity, sources of funds, etc. and also ensures compliance with the KYC norms before forwarding the application together with its comments/ recommendations to the RBI.

Can a branch office acquire property in India?

Branch offices of a foreign entity are permitted to acquire immovable property, in their own name, by way of purchase for their own use and to carry out permitted/incidental activities. They are not allowed to acquire immovable property for purpose of renting.

However, entities from Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, Hong Kong, Macau, Nepal, Bhutan or China are not allowed to acquire immovable property in India for a Branch office without prior RBI approval. These entities are allowed to lease immovable property for a period not exceeding five years at one time.

Can a foreign company establish more than one branch offices in India?

Yes, a foreign company can establish more than one branch office in India subject to approval of RBI. In case the number of offices exceeds 4, the applicant has to justify the need for additional office.

Can a branch office open a bank account in India?

Branch offices are allowed to open non-interest bearing INR current account with authorized dealer bank.

What is a UIN number?

UIN- Unique Identification Number is allotted by RBI to branch office once it is approved. This number is used for all correspondence, compliance and filings of branch office in India.

How are the expenses of a branch office taken care of?

Expenses of a branch office are met either through inward remittance of foreign exchange from the Head Office of foreign company situated outside India or from income earned by it in India or both.

Whether there is any additional requirement for foreign banks desirous of opening a branch office in India?

Foreign banks do not require separate approval for opening branch office in India. Approval from RBI is sufficient.

Whether branch office is also required to be registered with Ministry of Corporate Affairs?

Yes, branch office is required to be registered with MCA through concerned Registrar of Companies (ROC). Once branch office is registered with RBI, it is required to get itself registered with Ministry of Corporate Affairs as an establishment of foreign company in India.

What are the compliances/ returns that are applicable to a branch office?

  • Information report to DGP of concerned state within 5 days of BO becoming functional and then on a yearly basis
  • Information report to AD on yearly basis
  • Annual Activity certificate to RBI & DGP on yearly basis
  • Annual Activity certificate & Annual audited accounts to AD & Directorate General of Income Tax on yearly basis
  • Annual return and accounts with ROC

What are other business licenses applicable to a branch office?

Apart from registration with RBI, a branch office is required to obtain following registrations- 

  • Permanent Account Number
  • Tax Deduction Number, if required
  • VAT & CST registration, if required
  • Registrations under applicable tax laws
  • MCA approval

What is the procedure regarding closure of branch office?

The branch office is required to approach the authorized dealer along with prescribed documents, the authorized dealer after detailed verification of the documents and subject to prescribed process will forward the application for closure to Reserve Bank of India for approval.

Note :-

  • Timeline starts from receipt of complete and accurate documents/ information
  • Timeline is subject to time taken by AD, RBI and ROC to complete registration
  • Government fees varies from state to state
  • Extra charges will apply for an early turnaround