Branch office and Liaison Office

Business entities registered outside India (Foreign Company) can establish business operations in India without creating and registering a subsidiary company.

Subject to the RBI guidelines, a foreign company can open a Branch Office or Liaison Office in India. The scope of operations of such offices is typically limited to activities and functions such as country representative office, sourcing, technical and/or marketing support, import and export, etc.

Approvals for Branch Offices and Liaison Offices are granted based on the sectors in which the foreign company's principal business is conducted.

  • RBI route: Where the principal business of the foreign entity falls in sectors where 100% FDI is allowed automatically, only RBI approval is required.
  • Government route: For principal business operations falling under sectors where 100% FDI is not allowed through the automatic route; or entities seeking approval are non-governmental organizations (NGOs) or non-profit organizations or government bodies/departments; applications are reviewed by the RBI in consultation with the Ministry of Finance, Government of India.

Establishing a Branch/Liaison Office in India involves:

  • Seeking RBI approval through an Authorized Dealer of a Category I Bank;
  • Registration of the branch/liaison office with the Registrar of Companies, New Delhi.

Branch Office

Business entities incorporated outside India are allowed to set up Branch Offices in India with specific approval of the RBI. Such branch offices are permitted to represent the parent/group companies and undertake the following activities:

  • Export/import of goods;
  • Provide professional or consultancy services;
  • Undertake research work in areas in which the parent company is engaged;
  • Promote technical and/or financial collaboration between Indian companies and parent or overseas group companies;
  • Represent the parent company in India and act as the local buying/selling agent;
  • Render services in Information Technology (IT) and development;
  • Provide technical support to products supplied by parent/group companies;
  • Function as a foreign airline/shipping company.

Generally, branch offices should engage in the same activities as the parent company. Important Notes:

  • Retail trading activities of any nature cannot be undertaken by a branch office in India;
  • A branch office cannot carry out manufacturing or processing activities in India, directly or indirectly;
  • Profits earned by branch offices can be freely remitted from India, subject to the payment of applicable taxes.

Liaison Office

Business entities incorporated outside India are allowed to set up Liaison Office in India with specific approval of the RBI.

A Liaison Office (also known as Representative Office) can undertake only liaison activities, i.e. it can act as a channel of communication between the Head Office abroad and parties in India. LOs are not allowed to undertake any business activity in India and cannot earn any income in India. Expenses of such offices are to be met entirely through inward remittances of foreign exchange by the Head Office of the company. The role of such offices is, therefore, limited to collecting information about possible market opportunities and providing information about the company and its products to the prospective Indian customers.

A liaison office can undertake the following activities in India:

  • Represent the parent company/group of companies in India;
  • Promote export/import from/to India;
  • Promote technical/financial collaboration between parent/group companies and Indian companies;
  • Act as a channel of communication between the parent company and Indian companies.

Branch Office – SEZ

RBI approvals are not required to establish a branch/unit in Special Economic Zones (SEZ) to carry out manufacturing and service activities, subject to the following conditions:

  • Such units are functioning in those sectors where 100% FDI is permitted;
  • Such units comply with part XI of the Companies Act (Sections 592 to 602); and
  • Such units function on a standalone basis.

Project Office

The RBI grants general permission to foreign companies for setting up Project Offices in India, in instances where these companies secure contracts for executing projects in India from an Indian company. The following conditions should also be satisfied:

  • The project is funded directly by overseas inward remittances or funded by bilateral/multilateral international financing agencies;
  • The project has been cleared by the appropriate authority;
  • The Indian company or other business entity awarding the contract has received project finance by way of a term loan from an Indian public financial institution or bank.

Exceptions: If the above mentioned criteria are not satisfied, or the foreign company's parent entity is incorporated in Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran or China; applications for setting up a project office should be forwarded to the Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai, for prior approval.


Branch offices and liaison offices should file an Annual Activity Certificate (AAC) at the end of each financial year, i.e. March 31. The AAC should be obtained from a qualified Chartered Accountant. A copy of the AAC along with the audited Balance Sheet should also be filed with the designated Category I Bank's AD on or before September 30 of that year. A copy of the same should also be sent to the Directorate General of Income Tax (International Taxation), New Delhi.

In case the annual accounts of the LO/BO are finalized on a date other than March 31, the AAC and audited Balance Sheet should be submitted within six months from the date of preparation of the balance sheet to the designated AD from a Category I Bank.

Registrar of Companies, Compliance

Compliance under Company Law

  1. Annual Filing: Foreign companies should prepare a Balance Sheet and Profit & Loss Account Statement and file a copy with the ROC. If such documents are not in English, a certified translation should also be annexed.
  2. Periodic Filing: Foreign companies are required to file periodic returns with the ROC in the following events:
    (a) Changes in Charter documents/Memorandum and Articles or any other instrument that defines the foreign company's constitution.
    (b) Change of address for Registered/Principal offices of the foreign company.
    (c) Change of Directors or Secretary of foreign company.
    (d) Change of Authorized Representative(s) in India and changes in the name or address of such person.
    (e) Change of the principal place of business in India.

Tax laws

The tax treatment of a branch office is different from that of a company registered in India. The present tax rate applicable to a foreign company branch is 42%. Apart from direct tax, a branch of a foreign company should also comply with all prescribed regulatory requirements under Indian Income Tax laws.

On the other hand, a liaison office cannot generate any income in India and is hence not required to pay any taxes. A liaison office should fulfill compliance requirements, including filing Annual Activity Certificate form at the end of each year and any other compliance requirements as applicable from time to time.