Establishment of Liaison Office in India is best suited to a foreign entity desirous to have a presence in India for acting as a sourcing division or to study the Indian markets with a prospective business venture. ‘Liaison Office’ acts as a channel of communication between the head office of a foreign entity and entities in India. It does not undertake any commercial/trading/industrial activity and all its expenses are met by the foreign entity.
- Representing the foreign entity in India.
- Promoting export / import.
- Promoting technical and financial collaborations between foreign entities and entities in India.
- Acting as a communication channel between the parent entity and Indian entities.
A person resident outside India (PROI) [Note-1] should have a financially sound track record,i.e., a profit making track record during the immediately preceding three financial years in the home country and net worth of not less than USD 50,000 or its equivalent. If PROI does not satisfy the given criteria and it is a subsidiary to other company, then it may submit a Letter of Comfort from its parent company which shall fulfill the given criteria.
The process involved in registration of liaison office with the RBI, ROC and police authorities has been elaborated in our website under the link www.bsamrishindia.com/incorporation/branch-office/.
Time Limit for Opening LO
- 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 LO
- In case of NBFCs and entities engaged in construction and development sectors: 2 years
- In all other cases: 3 years, it can be extended by further 3 years by AD Category-I bank
Filing Annual Activity Certificate
The Annual Activity Certificate (AAC) shall be submitted by the following:
- In case of a sole LO, by the LO concerned.
- In case of multiple LOs, a combined AAC in respect of all the offices in India by the nodal office of the LOs.
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 expert team assists our clients to obtain mandatory approvals from the RBI and subsequent registrations with other authorities in the shortest possible time frame.
The Foreign Exchange Management Act, 1999 (FEMA):
Section 2(w) – “person resident outside India” means a person who is not resident in India
Section 2(v) – “person resident in India” means-
1. A person residing in India for more than 182 days during the course of the preceding financial year but does not include-
A. a person who has gone out of India or who stays outside India, in either case-
- for or on taking up employment outside India, or
- for carrying on outside India a business or vocation outside India, or
- for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;
B. a person who has come to or stays in India, in either case, otherwise than-
- for or on taking up employment in India, or
- for carrying on in India a business or vocation in India, or
- for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;
2. any person or body corporate registered or incorporated in India,
3. an office, branch or agency in India owned or controlled by a person resident outside India,
4. an office, branch or agency outside India owned or controlled by a person resident in India;