Overview of Liaison Office Registration

A liaison office or a representative office works as a communication channel between the parent company settled abroad and their parties in India. Foreign companies take liaison office registration in India to explore and support business prospects in India.

Such an office acts as a communication bridge. It promotes import and export from/to India, promotion of technical and financial participation of foreign parents/group company, conducting market research, providing feedback, etc.

Foreign investors appreciate the opportunity that liaison offices offer. It allows international investors to investigate the Indian market and establish a fast-growing market while limiting their financial, legal, and administrative responsibilities.

Permitted Activities of Liaison Office in India;

• Establish healthy communication between the foreign head company and the parties in India with a motive to create market opportunities
• Promotion of import/export relationship between countries
• Form a financial and technical collaboration between Indian and overseas companies
• Represent the foreign parent company in India

As India is among rapidly growing and progressing economies globally, many multinational companies are willing to invest in the Indian market. Therefore, they are always looking forward to establishing their liaison office in India.

Important points to consider before registering Liaison office in India

Net Worth Requirement

A parent company must have a beneficial track record of the past three years in a row, and they should own a net worth of more than $50,000 attested by their auditors.

No Income Generating Activity

The parent company provides financial aid to all the operations of the liaison office since the liaison office is not allowed to earn any income in India.

Name & New Additional Liaison Office

The name must be similar to that of the foreign parent company. In addition, a new approval is needed for each new liaison office from the Reserve Bank of India with complete justification.

Taxation in India

Income tax authorities have the right to impose income tax on a liaison office.

Route of RBI Approval

Automatic route

In the automatic route, the proposed entity applicants do not require prior approval from RBI or the government of India. So these are the sectors where 100% FDI is allowed.

Also, such applicants belong to countries with whom India does not share land borders.

Approval Route

The approval route applies in the following circumstances;

1. The applicant company is headquartered at, or an applicant is a citizen of Pakistan, China, Sri Lanka, Iran, Afghanistan, Bangladesh, Hong Kong, or Macau, and the application is for opening a BO/LO/PO in Jammu and Kashmir, Andaman and Nicobar Islands; and North East region.

2. The principal business activity falls in the four sectors, namely Private Security, Telecom, Defence and Information, and Broadcasting.

3. The applicant is an NGO

List of Documents for Liaison Office Registration

Documents required from Parent Company

• Certificate of Incorporation/Registration of Foreign Company
• Memorandum of Association
• Article of Association
• Complete details of Directors
• Complete details of shareholders of the applicant company
• Net worth certificate attested by Certified Public Accountant (CPA)
• Audited financial statement of the last three years
• Applicant’s banker’s report

Documents required from the proposed authorized signatory

• 5 Passport size photos
• 5 copies of passport
• Business visa with immigration stamp of arrival
• 5 copies of national identity card
• Address Proof (Bank Statement/ Electricity / Water Bill / Phone Bill)
• Board resolution while appointing the AR
• Power of attorney in the name of AR

Eligibility Criteria for Liaison Office Registration in India

Foreign Exchange Management Regulations, 2016 governs the establishment of a place of business for a foreign company. Therefore, it is important to fall under the criteria of the below-mentioned qualifications to set up a liaison office in India:

• Income-generating activity is prohibited.
• The foreign head office must own net worth of above $50,000
• A beneficial track record of the past three years of the applicant company is required

Drafting of Government Forms and Documents

On receiving the complete set of Documents, the next step is to draft the following necessary papers for the signature purpose by the applicant company and from the authorized signatory.

• Approval from the Board Resolution for opening the liaison office in India.
• A declaration from the applicant regarding the FDI eligibility and source of fund
• A declaration stating the nature of the activity, location of the activity of the proposed Liaison office
• A declaration stating the nature of the activity and the location of activity of the applicant company
• Form FNC
• A letter of comfort from the holding company

Liaison Office Registration Process in India

Filling of Application with RBI through AD Bank

A foreign company's liaison office application is filed with the FNC. The application is submitted through AD Bank to the Reserve Bank of India (Authorised Dealer). The AD bank plays a crucial function since it is through them that all contact with the RBI is routed.

Verification Of KYC From Banker Of Parent Company

A request for Document examination is issued to the banker of the foreign firm. The process of sending requests for verification purposes is called swift-based verification.

Once the foreign lender has validated the paper works, the application is sent to the RBI for approval. The RBI may also request other paper works, depending on the circumstances.

Approval of RBI for Liaison Office Registration in India

A particular policy is followed for approving the liaison office in India by the AD Banker. Priority is given to the cases where the automatic route is not available.

Registration of Liaison Office with ROC

Once the company is formed, its bank account is opened, wherein the FDI should reach within 180 days of forming the company with an advance announcement to the banker.

PAN Card, Tax Deduction Number, and Bank Account Opening

The income tax department of India issues a unique 10 digit number, known as PAN number. Once the PAN number is obtained, the liaison office is eligible to open its bank account. And every taxpayer must obtain a Tax Deduction Account Number to obey all the TDS norms.

GST Registration & IEC

On obtaining Bank Account and cheque book, a copy of the check is needed to apply GST registration and Import Export Code.