One of the legal manners for starting a company in India is by establishing a liaison office. Also known as a representative office, it can only enter specific activities and it cannot start any commercial operations. Although this business structure does not fall under the regulations for commercial companies, similar incorporation steps have to be followed – such as setting up a corporate bank account at a local bank. Our team of consultants in company registration in India can assist foreign investors with information on the documents that have to be filed with local authorities when setting up a liaison office in India.
| Quick Facts | |
|---|---|
| What is a liaison office? | It is a representative office established by a company in a foreign location to facilitate coordination without engaging in profit-generating activities. |
|
Purpose |
It facilitates communication and coordination between a company and its affiliates or partners. |
|
Legal status of a liaison office in India |
A registered liaison office in India considered a foreign company, must annually file an income tax return. |
| Approval | To set up a liaison office in India, approval from the Foreign Exchange Department of the Reserve Bank of India (RBI) is mandatory. |
| Submissions |
The Indian liaison office must submit a list of its established business locations in India, along with the financial statement, using Form FC.3 to the Registrar on the balance sheet date. |
| Decision-making |
No decision-making authority; advisory role. |
| Activities |
Does not engage in any commercial, trading, or industrial activities, either directly or indirectly. |
| Audit |
The liaison office must annually prepare and have its Indian business operations’ financial statements audited by a practicing Chartered Accountant in India. |
| Land acquisition |
A representative office in India is prohibited from purchasing any immovable property, except through leasing for a duration not exceeding five years. |
| Compliance required for a liaison office in India (Yes/No) | Yes, must comply with the Companies Act, 2013. |
| Funding |
A liaison office in India sustains itself using funds received from abroad through regular banking channels. |
| Eligibility |
To register a representative office in India, a foreign entity needs a profitable track record in the last three financial years in its home country and a net worth of at least US$ 50,000 or equivalent. |
| Additional liaison office application |
If the number of liaison offices surpasses four, the applicant must provide justification for any additional office(s), and prior approval from the RBI is necessary. |
| Contracts |
Limited business activities; no contracts signing power. |
| Legal assistance | Certainly, our Indian company formation agents can assist you in setting up a representative office in India. |
Table of Contents
Comprehensive guide to opening a liaison office in India
Setting up a liaison office in India involves several steps and compliance with regulatory requirements. A representative office is typically established by foreign companies to facilitate communication and promote their parent company’s interests in India. Here is a comprehensive guide provided by our Indian company formation consultants to help you navigate the process:
- Determine eligibility: Ensure that your foreign company is eligible to open a representative office in India. Liaison offices are generally permitted for companies engaged in specific sectors like manufacturing, trading, and infrastructure. Our specialists in India can guide you if you are eligible to set up a liaison office in this country.
- Choose a location: Select a suitable location for your liaison office in India. It should align with your business objectives and be conducive to your industry. When deciding to set up an Indian representative office, it’s crucial to meticulously consider the path you intend to follow. You are presented with two alternatives: one through the Reserve Bank of India (RBI) and the other through the Government route. Our company formation agents in India can guide you well about the suitable path that you should consider.
- Obtain RBI approval: Get prior approval from the Reserve Bank of India (RBI) by applying through the authorized dealer bank. The application should include details about your foreign company, the proposed liaison office’s activities, and a declaration of inward remittance.
- Prepare documentation: Prepare a set of required documents, including a letter of intent, board resolution, and a power of attorney authorizing the local representative to act on your behalf. If you have any questions about the documents, please consult with our company formation specialists in India. They will not only answer your concerns but practically assist you in setting up a representative office in India.
- Register with Registrar of Companies (RoC): Our agents will register your liaison office with the Registrar of Companies (RoC) within 30 days of receiving RBI approval. Submit the necessary documents, including Form 44.
- Open a Bank Account: Open a bank account in India in the name of your liaison office. This account will be used for financial transactions related to the liaison office’s activities.
- Permanent account number (PAN): Apply for a Permanent Account Number (PAN) for your liaison office. It is required for tax-related matters in India.
- Tax compliance: Comply with Indian tax regulations, including Goods and Services Tax (GST) registration if applicable, and file regular tax returns with the help of our agents.
- Annual reporting: Your representative office must submit an annual activity report to the RBI and maintain compliance with the terms of the approval. If you need any help, the services of our accountant in India are at your disposal.
- Comply with local laws: Ensure that your representative office in India adheres to all local laws and regulations, including labor laws, intellectual property laws, and foreign exchange regulations.
- Renewal of approval: Keep track of the validity of your liaison office’s approval. You may need to apply for a renewal if required.
Please note that opening a liaison office in India can be complex and may involve specific requirements depending on your industry and the nature of your business activities. Seeking guidance from our company formation experts in Indian business regulations is advisable to ensure smooth compliance with all legal and regulatory aspects.
Regulations on liaison offices in India
The registration of a liaison office in India is defined under the Foreign Exchange Management Act (FEMA). According to the provisions of the Act, a representative office can be seen as a channel of communication between the headquarters of a foreign company and the legal or institutional entities operating in India.
The Act also states that the liaison office cannot operate in the following activities:
- commercial activities;
- trading activities;
- industrial activities.
Businessmen interested in the procedure of company formation in India should know that the liaison office has to be registered with the Reserve Bank of India (RBI) and obtain approval from this institution to operate on the Indian territory. Our representatives can assist investors with more details on the registration with the RBI.
Activities of an Indian liaison office
To open a company in India registered as a liaison office, foreign investors may enter only the following activities:
- represent the interests of the foreign company in the Indian market;
- promoting import-export activities between entities in India and the country where the company is registered;
- promoting technical or financial collaborations;
- facilitate the communication between the foreign company and the Indian parties.
Generally, it takes approximately 20 to 24 weeks to register a liaison office, which may operate on the local market for three years. However, if necessary, the investors may apply for an extension.
Foreign businessmen are invited to consult our team of specialists in company formation in India for more details regarding the registration of a liaison office. Here is also a video on this subject:
Liaison officer salaries in India
Indian liaison offices facilitate networking with local businesses, industry associations, and government authorities, potentially leading to collaborations and partnerships that can benefit your company financially. Furthermore, a liaison office can help you conduct market research and gather valuable insights into the Indian market at a relatively lower cost than establishing a full-fledged subsidiary or branch. This information can assist in making informed investment decisions. Please find below the average salary of a liaison officer:
- The typical annual salary for a liaison officer in India averages ₹490,000, equivalent to ₹196 per hour.
- Entry-level roles typically commence at ₹400,000 annually, while highly experienced professionals can earn as much as ₹860,000 per year.
Our experts can help you manage payroll in India for your liaison office.
Besides this, if you need information on how to start a company in India, please contact our agents.