Foreign Companies who have been awarded a contract to execute a project in India, select the mode of execution of the project, through project offices duly registered with the Reserve Bank of India (RBI) and the Registrar of Companies (ROC). ‘Project Office’ also represents the interests of the foreign company executing a project in India as in the case of Liaison Office with the only difference, that Project Office can undertake commercial activities related to the particular project whereas the liaison office cannot.
A foreign company may open project office/s in India provided it has secured from an Indian company, a contract to execute a project in India, and
- the project is funded directly by inward remittance from abroad or by a bilateral or multilateral International Financing Agency; or
- the project has been cleared by an appropriate authority; or
- a company or entity in India awarding the contract has been granted term loan by a Public Financial Institution or a bank in India for the Project.
Note: RBI has given general permission for opening of Project Office in India if the above conditions are satisfied. However, if any entity resident in Pakistan, Bangladesh, Sri Lanka, China, Macau and Hong-Kong desires to open project office in Jammu & Kashmir, North Eastern States and Andaman and Nicobar islands, approval is granted by RBI in consultation with Government of India. In all other cases Authorised Dealer Category-I banks are empowered to grant approval.
Time Limit for Opening PO
- The office shall be opened within 6 months from the date of approval letter.
- Extension for 6 months may be granted by AD Category-I bank for reasons beyond the control of the person resident outside India.
- Further extension may be granted by RBI only.
Validity of PO
The PO remains valid for the entire tenure of the project (till the project is completed or wound up).
Foreign Currency Accounts by PO
POs can open non-interest bearing foreign currency accounts with AD Category – I banks subject to the following:
- The PO has been established in India as per the applicable regulations.
- The contract governing the project specifically provides for payment in foreign currency.
- Each PO can open 2 foreign currency accounts, usually one denominated in USD and the other in home currency of the project awardee but both shall be maintained with the same AD Category–I bank.
- They can be used only for payment of project related expenses and receiving foreign currency from the Project Sanctioning Authority and remittances from parent/group company abroad or bilateral / multilateral international financing agencies.
- The foreign currency accounts have to be closed at the completion of the project.
Remittance of Profit or Surplus
Authorized Dealer Category – I bank may permit intermittent remittances by project offices pending winding up / completion of the project subject to submission of certain prescribed documents.
Filing Annual Activity Certificate
The Annual Activity Certificate (AAC) shall be submitted by the following:
- In case of a sole PO, by the PO concerned.
- In case of multiple POs, a combined AAC in respect of all the offices in India by the nodal office of the POs.
Time Limit for Filing AAC
- Whose F.Y. ends on 31st March: Within 30th September of that year
- Whose F.Y. ends on some other date: Within 6 months from the end of the F.Y.
Our specialized team handling the matters related to establishment of Project Office in India offers our clients extensive support towards registration with RBI and ROC. Our scope of services includes: –
- Registration with the RBI and matters incidental thereto
- Registration with the Registrar of Companies (ROC) and assisting the clients in related documentation
- Registration with the Tax authorities
- Opening of Bank Account
- Maintenance of Book of Accounts and other statutory records
- Filing of Annual Activity Certificate (AAC)
For appointment and discussion of your case, please visit our ‘Contact us’ page.