BRANCH OFFICE SETUP IN INDIA
A branch office is a good business model for international firms pursuing temporary involvement in India. The branch office acts as an extension of the head office corporation which continues out the same activities as the parent organisation.
Most companies use this mode to learn more about the Indian market without long-term commitment. Accordingly, companies wishing to extend into Asia or diversify their Asia footprint may determine whether a branch satisfies their market entry criteria.
Conditions for forming a branch
Businesses seeking to create a branch in India must satisfy the following conditions:
Activities required
In India, a Branch can not carry out manufacturing activities directly unless that manufacturing operation is carried out in a special economic zone (SEZ) to export goods from India. It can also sub-contract such operation to an Indian company.
Furthermore, a foreign corporation would engage me in trading and manufacturing activities in its home country to create a branch office in India for the following tasks:
International companies whose key business falls within sectors where, under the automatic path, 100% foreign direct investment ( FDI) is allowed must complete the FNC form and send it to the RBI along with the relevant documents.
For other industries, the form must be forwarded to Finance Ministry. In this situation, the foreign company may forward the application for a branch office via a specified AD division – I bank to the RBI.
If the foreign company wants to create a branch in more than one location in India, it must register the branch or obtain separate RBI approval for each area. Also, RBI approval is required for should operation the branch office plans to conduct in India.
Registration protocols enable a foreign business to deposit as follows:
Redemptions
Outside India, a branch office can remit the branch 's benefit (net of applicable Indian taxes).
It must, therefore, generate the following documentation and create net benefit or surplus for the designated dealer for whom the remittance is affected:
Most companies use this mode to learn more about the Indian market without long-term commitment. Accordingly, companies wishing to extend into Asia or diversify their Asia footprint may determine whether a branch satisfies their market entry criteria.
Conditions for forming a branch
Businesses seeking to create a branch in India must satisfy the following conditions:
- The claimant business must be a non-India corporation;
- The Indian branch name must be the same as the parent corporation (if the branch office gets no income from India activities, the head office must cover its expenses);
- The branch's net worth must not be less than US$ 100,000;
- The parent company could report profit earning in the home country 's immediately corresponding five financial years.
- Where the applicant foreign entity may not meet the financial requirements, the parent company may issue a Letter of Comfort (LoC), as the organisation meets the specified standards for net worth and benefit.
Activities required
In India, a Branch can not carry out manufacturing activities directly unless that manufacturing operation is carried out in a special economic zone (SEZ) to export goods from India. It can also sub-contract such operation to an Indian company.
Furthermore, a foreign corporation would engage me in trading and manufacturing activities in its home country to create a branch office in India for the following tasks:
- Exporting or receiving goods;
- Technical or consulting services;
- Job of research;
- Representing and serving as the parent's purchasing or sale representative.
- How to declare a branch in India
- To open a branch office in India, a foreign business may apply for Reserve Bank of India (RBI) permission under Foreign Exchange Management Act ( FEMA), 1999.
International companies whose key business falls within sectors where, under the automatic path, 100% foreign direct investment ( FDI) is allowed must complete the FNC form and send it to the RBI along with the relevant documents.
For other industries, the form must be forwarded to Finance Ministry. In this situation, the foreign company may forward the application for a branch office via a specified AD division – I bank to the RBI.
If the foreign company wants to create a branch in more than one location in India, it must register the branch or obtain separate RBI approval for each area. Also, RBI approval is required for should operation the branch office plans to conduct in India.
Registration protocols enable a foreign business to deposit as follows:
- AR-signed FNC form;
- Details regarding the parent business and its certificate of incorporation approved by a Notary Public or Indian Embassy in the country of registration;
- Incorporate branch office records to be developed in India;
- Evidence of registration;
- Place notice or planned activity;
- Applicant 's new audited balance sheet;
- Group decision establishing regional office;
- KYC 's approved signatory;
- Details concerning parent's state members in the regional office.
- Fiscalisation
Redemptions
Outside India, a branch office can remit the branch 's benefit (net of applicable Indian taxes).
It must, therefore, generate the following documentation and create net benefit or surplus for the designated dealer for whom the remittance is affected:
- A verified copy of the audited balance sheet and report for the year concerned;
- A chartered accountant's certificate certifying how to obtain the remittable benefit, that the whole remittable benefit was received by performing the approved operations, and that the profit would not contain any profit on the branch 's asset revaluation.
