There are certain conditions for opening a branch in India for a foreign company. A branch can be opened for specific purposes, and there are some requirements and conditions for opening a branch office in India.

Branch in India - Purposes

Foreign companies, including USA companies, are allowed to set up Branch Offices in India for the following purposes:-

• Export/Import of goods.
• Rendering professional or consultancy services.
• Carrying out research work, in which the parent company is engaged.
• Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
• Representing the parent company in India and acting as buying/selling agents in India.
• Rendering services in Information Technology and development of software in India.
• Rendering technical support to the products supplied by the parent/ group companies.
• Foreign airline/shipping company.
• Foreign Banks.
• Retail trading activities of any nature is not allowed for a Branch Office in India.
• A branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer. Branch Offices established with the approval of RBI, may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines Permission for setting up branch offices is granted by the Reserve Bank of India (RBI)

Requirements and Conditions of a Branch Office

• The name of Indian Branch office shall be same as parent company.
• The Branch office does not have any ownership, it is just extension of the exiting company in the foreign country.
• All the expenses of the BRANCH office are met by the head office, if it does not have the revenue from Indian operations.
• The foreign parent company looking to start a Branch office in India shall have a profitable track record during immediately preceding five years in the home country.
• The Net Worth i.e. total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name shall be not less then or equal to USD 100,000.
• A branch office is is suitable for foreign companies looking to setup a temporary office in India and not interested or not planning to have long term plans for the Indian operations; except banking, shipping and airlines etc. mentioned above.
• Branch offices have to file an Annual Activity Certificate (AACs) from the Auditors, as at end of March 31, along with the audited Balance Sheet on or before September 30 of that year, stating that the Branch Office has undertaken only those activities permitted by Reserve Bank of India. In case the annual accounts of the BO are finalized with reference to a date other than March 31, the AAC along with the audited Balance Sheet may be submitted within six months from the due date of the Balance Sheet.
• BOs are required to furnish copy of the Annual Activity Certificate (AAC) to Director General of Income Tax (International Taxation), Drum Shaped Building, I.P. Estate, New Delhi 110002.Copies of the AACs submitted to the DGIT (International Taxation) should be accompanied by audited financial statements including receipt and payment account.

Documents required for forming a Branch Office in India

Currently as per the RBI Requirement the application for the branch office and BRANCH office is submitted through the Authorized dealer. The authorized dealer means the various institution having banking licenses.

The following filings are required to open a branch office in India:-

Form FNC 1 (Three copies)

The applications from such entities in Form FNC will be considered by the Reserve Bank under two routes:-

Reserve Bank Route:- Where principal business of the foreign entity falls under sectors where 100 per cent Foreign Direct Investment (FDI) is permissible under the automatic route.

Government Route:- Where principal business of the foreign entity falls under the sectors where 100 per cent FDI is not permissible under the automatic route. Applications from entities falling under this category and those from Non - Government Organisations / Non - Profit Organisations / Government Bodies / Departments are considered by the Reserve Bank in consultation with the Ministry of Finance, Government of India.

• Letter from the principal officer of the Parent company to RBI.
• Letter of authority from the parent company in favor of Local Representative.
• Letter of authority/ Resolution from parent company for setting up BRANCH office in India.
• Comfort letter from the parent company intending to support the operation in India.
• Two copies of the English version of the Certificate of Incorporation, Memorandum & Articles of association (Charter Document) of the parent company duly attested by the Indian embassy or notary public in the country of registration.
• Certification of Incorporation - Translated & Duly Notarized and properly authenticated.
• The Latest audited Balance sheet and annual accounts of parent company duly Translated notarized for past Three years and properly authenticated.
• Name, Address, email ID and telephone number of the authorized person in Home Country.
• Details of Bankers of the Organization the Country of Origin along with the bank account number.
• Commitment from the Organization to the effect that it will be open to report / opinion sought from its banker by the Government of India / Reserve Bank of India.
• Expected funding level for operations in India.
• Details Relating to address of the proposed local office, number of persons likely to be employed, number of Foreigners among such employees and address of the head of the Local office, if decided Details of Activity carried out in Home Country by the applicant organization in brief about the product and services of company in Brief.
• Bankers Certificate.
• Latest Proof of identity of all the Directors - Properly Certified by Banker in Home Country and duly authenticated.
• Latest Proof of address all of Directors - Properly Certified by Banker in Home Country and duly authenticated.
• Details of the Individuals / Company holding more 10% of Equity.
• Structure of the Organization and its Shareholding pattern.
• Complete KYC of Shareholders holding more than 10% Equity in the Applicant Company.
• Resolution for Opening up Bank Account with the Banker.
• Duly Signed Bank Account Opening Form for Indian Bank.
• The application for BRANCH office Licenses is approved by the RBI, but as per the recent changes the applications for BRANCH office are routed through the Authorized Dealers (AD). Due to this the timeline for setting up the BRANCH office has increased tremendously. Further the documentation required for the same has also increased to a great extent.

Other Incorporation Requirements for Branch Office

Every Branch office registered with RBI shall get itself registered with the Ministry of Corporate Affairs, It is a registration by the Branch office as a establishment of foreign company in India. On such registration a CIN i.e., Corporate Identity Number is allotted by the Registrar of Companies. The following documents shall be filled with the Registrar of Companies :-

Form FC-1 Charter, statutes or memorandum and articles of association or other Instrument constituting or defining the constitution of the company(In the manner provided under Rule 16, 17 of the Companies (Central Government's) General Rules and Forms, 1956).

• If the above documents are not in English then the translated version of the documents.
• Director(s) details - individuals.
• Director(s) details - bodies corporate.
• Reserve bank of India approval letter.
• Secretary(s) details.
• Power of attorney or board resolution in favor of the authorized representative(s)

After Incorporation, the following requirements are also necessary for a branch office:-

• Permanent account number - PAN
• Tax deduction number - tan number Shop & establishment.
• Registration Service Tax Registration � if the
• Branch provides any services in India.

Branch Offices are permitted to remit outside India profit of the branch net of applicable Indian taxes, on production of the following documents to the satisfaction of the Authorised Dealer through whom the remittance is effected :-

   a)  A Certified copy of the audited Balance Sheet and Profit and Loss account for the relevant year;

   b) Chartered Accountant’s certificate certifying -

   i)  the manner of arriving at the remittable profit. that the entire remittable profit has been earned by undertaking     ii)  the permitted activities.

iii) that the profit does not include any profit on revaluation of the assets of the branch.

Taxation rules applicable Office

Branch office will be liable to pay 40% (plus surcharges as applicable) of profits as income tax in the status of Foreign Company in India. As per the functioning of branch office in India, it shall be liable to different indirect taxes as well, for example, if the Branch is providing technical services it shall be liable to pay service tax @ 14.5% (plus surcharges) and if it is selling the goods in India then it shall be liable to pay Value added Tax (VAT) and/or Central Sales Tax (CST) at the rates prescribed for the dealt product. There is Local Body Tax (LBT) if the goods are entering the state of Maharashtra in India as few of these indirect taxes are levied by States. With the implementation of GST, the indirect tax regime in India will get simplified.Profits earned by the branch offices are freely remittable from India, subject to payment of applicable taxes.

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