A branch of a foreign company operating on the Indian market can be set up only for specific business activities. When starting a business in India that will be incorporated as a branch office, the representatives of the foreign company should receive approval from the Foreign Exchange Department, Reserve Bank of India (RBI), situated in Mumbai.
The Reserve Bank of India will verify the activity of the applicant company and further on, the foreign legal entity will need to submit specific company documents. Our team of agents in company registration in India can assist foreign investors with advice on the minimum requirements available for opening a branch office in one of the Indian cities.
|Applicable legislation (home country/foreign country)||
Best Used For
|Financial and insurance operations, import-export, IT, research activities|
Minimum share capital (YES/NO)
|YES, min. 100,000 USD|
|Time frame for the incorporation (approx.)||Approx. 2 months|
|Documents to be filed by parent company||Information about the parent company, list of activities to be conducted in India, proof of legal address in India, incorporation documents for the branch|
Local, at least one resident director
|Legal representative required (YES/NO)||
YES, the resident director
|Local bank account (YES/NO)||YES|
|Independence from the parent company||The branch depends on parent company|
|Liability of the parent company||The parent company is fully liable for branch operations|
|Corporate tax rate||40% plus surcharges|
|Annual accounts filing requirements||Annual accounts and audited financial statements
must be filed
|Possibility of hiring local staff (YES/NO)||YES|
|Travel requirements for incorporating branch/subsidiary (YES/NO)||NO|
|Double tax treaty access (YES/NO)||YES, approx. 90 double tax treaties|
The conditions under which foreign companies can set up branches in India
The branch office will operate as an extension of a foreign company, which is why the entity registered abroad as the main shareholder must make sure the Indian business respects the requirements imposed here.
There are several conditions that must be met in order to create a branch in India:
- the company setting up the branch must be legally registered in its home country;
- the branch must carry the same name as the parent company;
- the net worth of the branch (the minimum share capital that must be paid by the parent company) must be at least 100,000 USD;
- the parent company must submit its records that indicate its profits in the past 5 years.
If you are interested in setting up a branch in India, our company formation advisors are at your service with information on the requirements to meet in order to create it. Also, the registration of a branch office takes around 3 months to complete with the bank account opening and licensing requirements to be met. This time frame is longer than in other countries, such as Latvia, where it takes 4 weeks for opening a company. In case you are interested in setting up an offshore company in another country, for example in BVI, our partners can assist you – bvicompanyincorporation.com.
The main features of branches in India
Many times, branches are compared to subsidiary companies, as they are both legal entities under which foreign companies can operate. What should be noted about the branch office is that it will operate as a satellite of the parent company and is bound to complete the same activities as the foreign entity.
In India, branch offices are permitted to operate under strict regulations and can carry out specific activities only.
Also, the branch office must bear the same name as the parent company, however, the trading name reservation must be completed upon registration. When the foreign entity has its name registered as a trademark, there should be no problems in operating its branch under it.
Creating a branch office in India implies the parent company bears sole responsibility for the obligations and debts of the Indian entity.
A particularity of setting up a branch in India is that this business form is suitable for those interested in temporary operations here unless the object of activity of the foreign entity enters the banking, shipping, or air transportation sectors.
If you want to expand your operations in India and need guidance, our specialists can help you. Do you want to extend your business in another country, such as Australia? We can put you in contact with our partners which can help you open a company or expand your business in this country.
Activities of a foreign branch office in India
In order to open a company in India that will perform its operations through a branch office, the applicant foreign business entity has to conduct its activities in specific business sectors, as prescribed by the national legislation applicable here. The branch office may perform one of the following:
- trading activities (the import or export of goods and products) orconsultancy services;
- research work, in a field of activity in which the parent company is already activating;
- developtechnical or financial operations in collaboration with Indian companies;
- buying/selling agents, airline and shipping activities or business activities related to banking;
- offering services in the information technology and software sector.
Foreign companies may also establish a branch office performing manufacturing activities, but in this case, it is necessary to perform the business operations through an Indian company. Certain activities can’t be conducted through a branch office in India, such as the retail operations of any type.
Also, the branch office may not diversify its operations outside the scope of those that have already been approved by the Reserve Bank of India. Businessmen may find out further details on the above mentioned details from our team of specialists in company formation in India.
Eligibility requirements for opening an Indian branch in 2023
Yes, when opening a company in India through a branch office, the new legal entity has to be registered following the regulations prescribed by the Companies Act 1956, the Companies Act 2013, but it also needs to comply with the provisions of the Foreign Exchange Management Act 1999.
Besides these, the investors of the branch office in India have to provide a financial record of the company abroad, in which the company’s annual profits can be tracked (the financial records for the last five years of activity). The company’s net worth value has to be of at least $100,000 and this must be proven by the company’s latest audited balance sheet.
For enhanced protection, foreign companies can register their names as trademarks in India.
Registration requirements for a branch office in India
The procedure on how to form a company in India in this case may last several weeks. RBI will grant permission in a period of maximum 4 weeks, provided that all the requirements are met. The foreign company should include the following information in the application with this institution:
- a detailed history of the business activities conducted by the parent company;
- the list of proposed operations that will be conducted in India through the branch office;
- the main reasons for conducting business activities in India through a branch office in this country;
- completing the Form FNC and submit it to the RBI, as long as the sector in which the branch office is registered allows 100% foreign direct investments; if other sectors are targeted, the form should also be sent to the Ministry of Finance.
What are the main incorporation documents for an Indian branch in 2023?
The procedure on how to form a company in India through a branch office in 2023 requires investors to deposit a wide set of company documents, besides the standard forms that are requested by the competent authorities in India. Our team of specialists in company formation in India can assist businessmen with advice on such documents, which are presented below:
- a representative of the parent company abroad (the principal officer) must address a letter to the RBI;
- it is also necessary to provide a letter from the company’s representatives through which they will appoint a local representative;
- a letter through which the parent company states that it will support the Indian branch office in developing its local operations;
- provide two copies of the company’s incorporation documents, attested by the Indian embassy in the country in which the parent company is located;
- a translated and certified copy of the company’s certificate of incorporation;
- a copy (translated and notarized) of the latest audited balance sheet and annual accounts;
- the contact information in the home country of the authorized person;
- an estimate on the funding level that will be used for the Indian branch.
Besides these, other relevant information will have to be offered. For example, it is necessary to offer an estimate on the expected number of employees that will work in the Indian branch office, the number of foreign employees, but also information concerning the company’s directors (regarding their identity and address).
Another requirement when starting a company in India is to offer detailed information concerning the management of the company. In this sense, the parent company must disclose details on the persons/entities that hold more than 10% of the company’s shares, the structure of the company and the shareholding structure. Other documents can be necessary in this case and we invite you to address to our team of consultants in company registration in India, who can offer more details.
If you need guidance on how to set up an Indian branch in 2023, our specialists can offer updated information.
The management of an Indian branch
One of the main requirements of setting up an Indian branch office is for the parent company to appoint at least one manager who must be an Indian resident. There is also the possibility for the foreign business to name a person working at the head office in the country of origin who can obtain a work permit and carry out his duty at the location in India. However, the manager must be a natural person, as the parent company cannot act as the director of the branch.
If you need assistance, our Indian company formation officers can help in the procedure of obtaining work permits for branch employees detached from the head office. We also offer accounting services related to employment, such as payroll and HR. Payroll in India proves to be a time-consuming and expensive task for most firms, in addition to keeping up with the dynamic economic environment and governmental restrictions. There are various advantages linked to using specialized services in this sense, among which a broad range of end-to-end solutions, ranging from the final settlement of departing employees through the induction for new hires.
Licensing requirements for Indian branches
Just like all companies in India, the branch too must obtain various business permits and licenses in order to complete its activities. However, the licensing phase falls onto the parent company that must complete the necessary procedure to obtain the permissions and clearances from the authorities regulating the sector of activity of the Indian branch.
Can branch offices acquire property in India?
In 2023, investors who want to open a company in India that operates through a branch office will be allowed topurchase property in this country, as long as the respective assets are used in order to perform the company’s activities and other associated operations. Following the regulations applicable in India, foreign companies can’t acquire property with the purpose of renting it.
However, it is important to know that branch offices or other types of companies originating in specific countries are not allowed to purchase property in India. This is applicable in the case of Pakistan, Bangladesh, Sri Lanka, Iran, Bhutan, China and Afghanistan.
When completing the application for registering a branch office in India, the investors will also need to provide English translations of the company’s statutory documents. At the same time, it is necessary to provide information on the company’s net worth value, which can’t be below USD 100,000.
For 2023, the branch office is one of the simplest ways of expanding a business in India as it is easy to register.
Are there any other procedures when opening an Indian branch in 2023?
Yes, investors should be aware that once the company is legally incorporated, other procedures need to be concluded. The newly formed company must obtain a permanent account number, and register for tax purposes. In this sense, the company can apply for a tax deduction number and register for value added tax.
The branch office is also legally required to comply with the accounting procedures that have to be fulfilled during a financial year. Thus, during this period, the branch office has to keep a book of accounts and must audit the company’s annual accounts. Also, the branch has to file for an annual activity certificate with the RBI.
Other institutions must obtain financial documents regarding the activity of the branch office in India in 2023 and this is the case of the Registrar of Companies (RoC), where the branch has to deposit the annual return and the annual balance sheet. In the situation in which the company will suffer various changes, the local institutions have to be announced. Thus, RoC and RBI have to be notified of any change related to the branch office, but this also is applicable when the parent company changes the company’s directors or modifies any provisions of its founding documents.
Investors should also know that in 2023 they may set up a branch office in India in the country’s Special Economic Zones (SEZ). However, when opening a branch in these regions, the branch office will be limited to performing its business activities only in these special zones.
As mentioned above, branch offices are not allowed to develop certain types of economic activities (such as retail), but when operating in an Indian SEZ, the company may enter such operations in specific conditions, and it will not be necessary to obtain approval from RBI. Depending on the type of economic activity carried out here, the company’s representatives may also need to conclude the steps for VAT registration in India.
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Taxation and accounting regulations for branches in India
Just like other profit-making entities, the Indian branches must pay their taxes here. The main difference between them and domestic companies is that branches are subject to taxation on the income generated in India.
The following corporate tax rates must be considered by an Indian branch office:
- 41.60% for income of less than 10 million INR;
- 42.43% for income ranging between 10 million and 100 million INR;
- 43.68% for income above 100 million INR.
However, it is important to note that India has signed many double tax agreements which cover the taxation of permanent establishments such as branch offices. This is why, in the case of foreign companies with which India has signed such treaties, the fiscal treatment applied to their branches is advantageous.
According to the World Bank, the Indian economy would expand by 6.9% in the 2023 fiscal year. Notwithstanding a difficult external environment, India’s economy would grow at the quickest rate among the seven largest emerging markets and developing nations.
Also, branch offices can remit the profits they make in India to their home countries after paying the corporate tax.
From an accounting point of view, a branch is required to:
- keep a books of accounts;
- have its annual accounts audited;
- file a yearly activity certificate with the RBI;
- file a yearly return and balance sheet with the Companies House.
Also, any change made in the branch or its parent company must be reported with all Indian authorities concerned.
The application is comprised of a set of documents that must be submitted by the applicant andforeign entities are invited to contact our team of consultants in company formation in India for in-depth advice on this subject. Our representatives can offer advice on thefees and otherassociated costs related to the registration of a branch office in an Indian city. Online software will be used to do the accounting services remotely. For any questions, our accountant in India will be reachable via phone and email. This way, the interaction will be fast and reliable for both the business owner and our specialists who can continue providing their services.