LIAISON OFFICE REGISTRATION IN INDIA

Meaning of Liaison Office

A ‘Liaison Office’ (LO) functions as a representative office set up primarily to explore and understand the business and investment climate in India. It is also known as ‘Representative Office’.
Foreign investor or foreign companies can open a liaison office in India for promoting and facilitating the parent company’s business activities. Liaison Office can act as a communication channel between the head office abroad and clients (customers/ vendors) in India.
The role of such offices is to explore and collect information regarding market opportunities and provide such information to parent company and also to provide product information to the prospective Indian customers and vendors. Expenses incurred for such offices are to be met entirely through inward remittances from the Head Office situated outside India.
Foreign companies can establish their liaison office in India with the specific approval of RBI.

Activities which are permitted to be undertaken by a Liaison Office in India:

Representing in India the parent company/ group companies
Promoting export/ import from/ to India
Promoting technical/ financial collaborations between parent/ group companies and companies in India
Acting as a communication channel between the parent company and Indian companies.

Procedure for setting up Liaison Office:

If a foreign company intends to set up a Liaison Office in India, it is required to obtain the prior approval of Reserve Bank of India (RBI). This may take up to 4-6 weeks for processing of approval.
Approval is granted for 3 years and can be renewed on expiry thereof.
Any Body-Corporate incorporated outside India (including a firm or other association of persons) can open a Liaison Office in India by making an application in FORM FNC with the Authorised banker (AD Category I) in India.
The application should be supported by the prescribed documents (given below)
After proper scrutiny, AD bank shall forward the application together with their comments/ recommendations to the RBI for its approval. There are two routes for setting up a Liaison Office (LO) in India under FEMA, 1999:
(I) Automatic Route- Where principal business of the foreign entity falls under sectors where 100% FDI is permissible under automatic route.
(II) Approval Route- Where principal business of the entity falls under the sectors other than Automatic Route, the approval is made by RBI in consultation with the Ministry of Finance, Government of India.
After getting approval by RBI, a Unique Identification Number (UIN) is allotted to the Liaison Office.
Every Liaison office registered with RBI shall get itself registered with Ministry of Company Affairs (MCA) as corporate entity. The Foreign company is required to obtain a Certificate of Establishment of place of business (E-Form FC-1) in India from the ROC. The jurisdictional ROC will allot Corporate Identity Number (CIN) to such company. Further, the Liaison Office shall also obtain a Permanent Account Number (PAN)/ Tax Deduction Number (TAN) for setting up the offices in India.

Documents required for MCA registration

List of directors with their address and ID proofs	Name and address of the company’s Authorised signatory in India (who is authorised to sign on behalf of company)
Name and address of the Liaison Office in India	Address of foreign entity’s principal place of business outside India
A notarized and apostilled copy of the Liaison office charter or MOA or AOA in English.

Eligibility criteria for setting up a Liaison Office by a foreign entity:

Profit Making Track Record

The foreign entity (applicant) must have a profit-making track record during the immediately preceding 3 financial years in the home country.

Net-Worth Requirement

The foreign entity (applicant) should have a minimum net-worth of US $ 50,000 or equivalent (based on latest Audited Balance Sheet certified by Certified Public Accountant or any Registered Accounts Practitioner by whatever name called)

No Commercial/ Trading activities

Liaison Office is not permitted to undertake any commercial or trading or any other profit-making activity.

Name & New Office

The name of the Liaison Office must be same as of the foreign entity. For each new Liaison Office, fresh approval of RBI is required.

Note: In case, the applicant foreign entity does not satisfy the eligibility criteria and it is a subsidiary of another company, then it may also submit Letter of Comfort (Annex-2) from their parent company, subject to the condition that such parent company satisfies the eligibility criteria as prescribed.

List of documents required for registration of Liaison Office:

Documents of Parent Foreign Entity
Form FNC-1 (three copies) Two Copies of English version of the Memorandum of Association & Articles of Association of the foreign entity (attested by Indian Embassy or Notary Public in the country of registration) Certificate of Incorporation- English Version duly notarised or attested by Indian Embassy Latest Audited Balance Sheet and annual accounts of the foreign entity for past three years translated duly notarised & certified by Indian Embassy & directors Latest Proof of Identity & Address of all the directors- certified by Indian Consulate and bankers in the home country Banker’s Report from the applicant’s bankers in the parent country- for details of bankers of the foreign entity Operating history of the company worldwide, proposed interests and activities in India Complete details of directors/ key executives of the foreign entity including shareholding details, nationality and passport number etc. Details (KYC) of shareholders of the applicant entity holding more than 10% voting power Organizational structure- shareholding pattern Resolution for opening of bank account with the banker in India Net-worth Certificate of foreign entity duly certified by CPA Nature of activity and Proposed location for such activities
Documents from Authorised signatory	Other Documents required
Colour Photo- 5 copies Passport- 5 copies Business Visa Copy with immigration stamp of arrival National Identity Card- 5 copies Latest Address Proof (Bank statement/ Electricity/Water/ Phone Bill) - 5 copies Mobile Numbers & Email id of Authorised signatory	Letter of Authority/ Power of Attorney in favour of AR Resolution by Board approving the opening of Liasion office in India Letter of Authority in favour of Authorised signatory for signing the documents on behalf of the foreign entity and for opening of bank account Comfort Letter from Parent company of the applicant, if required

Salient Features of Liaison Office:

The name of Indian Liaison Office (LO) shall be same as foreign parent company.
It is suitable for foreign companies which are looking to set up a temporary office in India to liaison its existing business with Indian clients.
The Liaison Office is simply an extension of the existing foreign company abroad.
All the expenses of the Liaison Office are met by the head office; hence, the funds shall be received from head office account only.
Liaison Office can open a non-interest-bearing INR current account in India. For opening a bank account, L.O. is required to approach to their Authorised Dealer.

Restrictions on activities of Liaison Office:

Liaison Office can neither borrow or lend money in India
The Liaison Office is not allowed to undertake any commercial/ trading/ industrial activity, directly or indirectly and thus cannot derive any income in India

Countries for which Liaison Office cannot be set up under Automatic Route & prior approval of RBI required:

Pakistan
Bangladesh
Sri Lanka
Afghanistan
Iran
China
Hong Kong
Macau

Regulatory approvals (other than RBI) required for Liaison Office:

If any foreign bank wants to open a LO in India, it has to obtain approval from the Department of Banking Regulation (DBR), RBI.
Foreign Insurance Companies can set up liaison offices in India after obtaining approval from Insurance Regulatory and Development Authority (IRDA).
In other cases, approval under FEMA is required from RBI for setting up of a Liaison Office in India.

Compliances to be made by Liaison Office

(a) Filing of report with DGP of the state:

A Liaison Office is required to submit a report containing information, as per format (Annex-3) provided within 5 working days of the LO becoming functional to the Director General of Police (DGP) of the state concerned in which LO has established its registered office.
In case, there is more than one office of such foreign entity, report to be submitted to each of the DGP concerned of the state where it has established such office in India.
A copy of report in Annex-3 shall be filed with the DGP concerned on annual basis along with a copy of the AAC, and also with the AD concerned.

(b) Filing of Annual Activity Certificate & Audited balance Sheet:

Every Liaison Office is required to file Annual Activity Certificates (AAC) (Annex-4) certified from Chartered Accountants, as at the end of March 31^st every year, along with audited Balance Sheet (to be filed on or before September 30^th of that year).
AAC shall also be submitted to the designated AD Category- I Bank as well as Director General of Income Tax (International Taxation), New Delhi.
In case the annual accounts of the LO are finalized on some date other than 31^st March, the AAC along with audited Balance Sheet may be submitted within 6 months from the date of Balance Sheet to designated AD Category-I Bank as well as DGIT (International Taxation).

(c) Compliances under Income Tax Act:

Furnishing of AAC along with Audited Balance Sheet and Receipts & Payments Account to DGIT (International Taxation)
Under Rule 114DA of the Income Tax Rules, the Liaison Office shall furnish Form 49C in accordance with section 285 of the Act along with prescribed documents within 60 days of the end of the financial year i.e. 30^th May of each year.
Since, Form 49C is submitted along with AAC, the time limit for filing of AAC under Income Tax Act shall also be reckoned as 30^th May of each Financial year and thus the time limit given by RBI (30^th September) shall not be considered.
Comply with withholding tax requirements in respect of payments made by Liaison Office

(e) Compliances under Companies Act:

Filing of E-Form FC-1 to MCA within 30 days of the establishment of its Place of Business in India
Filing of E-Form FC-2 in respect of alteration in the documents filed at the time of registration before the MCA namely change in constitution or change in directors of the company
Filing of E-Form FC-3 for reporting the annual accounts along with the list of all principal place of business in India to MCA
Filing of E-Form FC-4 for Annual Return to MCA

(f) Other Compliances:

GST compliances for availing services, whereever applicable
Labour law compliances such as Shop & Establishment Act, ESI & PF

How Taxwink can help you?

Preparation of documents required for setting up Liaison Office in India
Obtaining approval of RBT for setting up of Liaison Office in India
Registration with MCA and obtaining CIN
PAN/ TAN registration
Shop & Establishment Act Registration
ESI & PF registration
Accounts and Payroll Processing of Liaison Office.
GST Registration and filing of GST returns
Filing of Withholding Tax Returns
Annual audit and issuance of AAC
Reporting of Liaison Office on annual basis to DGP, MCA, AD Banker and DGIT (International Taxation)
Various other compliances as required from time to time

For further information and Liaison Office Registration services, you may contact at: +91-9660930417

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