Open Liaison Office

Open Liaison Office

Liaison office is setup by a foreign company in India to carry out the liaison activity for its business. Foreign companies can open a liaison office in India to facilitate and promote the parent company’s business activities, and act as a communications channel between the foreign parent company and Indian companies. The company cannot have any revenue for the Indian Liaison office; It has to meet all its expenses of Indian office through remittances from the Head office. The Liaison office is not allowed to earn any income in the India.


A Liaison Office or a Representative Office can undertake only liaison activities, which means that it can act as a channel of communication between the Head Office (out of India) and parties in India. Unable to engage in commercial, trading, or industrial activities, liaison offices must be sustained by private, inward remittances received from their foreign parent company. A liaison office is permitted to engage in the following activities:-

  • Facilitate communication between the overseas head company and parties in India to establish market opportunities;
  • Promote imports/exports between countries;
  • Establish financial and technical cooperation between overseas and Indian companies;
  • Represent the overseas head company in India.


The Foreign Exchange Management Act (FEMA) governs the application and approval process for the establishment of a liaison or branch office. Under the Act, foreign enterprises must receive specific approval from the RBI to operate a liaison office in the country. Applications are to be submitted through Form FNC .


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.


The approval process generally takes 20 to 24 weeks and permission to operate a liaison office is granted for a three-year period, which can be extended at a later date. An enterprise must also meet the following conditions before qualifying for the establishment of a liaison office:-

  • Must have a three-year record of profitable operations in the home country; and
  • Must have a minimum net worth of US$50,000 verified by the most recent audited balance sheet or account statement.

If a company does not meet these requirements, but a subsidiary of a company that does, the parent company may submit a Letter of Comfort on the subsidiary’s behalf. A company must submit a Certificate of Incorporation or Memorandum & Articles of Association, and a copy of the parent company’s latest audited balance sheet. The liaison office must also obtain a Permanent Account Number (PAN) from the Income Tax Authorities.


Within 30 days of establishment, the liaison office must register with the Registrar of Companies (RoC) by filing FC-1 through the Ministry of Corporate Affair’s online portal. The following documents must also be provided:-


  1. A copy of the liaison office charter or Memorandum & Articles of Association in English;
  2. Full address for the enterprise’s principal place of operation outside of India;
  3. Name and address of the liaison office in India;
  4. List of directors.
  5. Name and address of the company’s official representative based in India (e.g. the person authorized to accept delivery of notices and documents served to the company).


Each year, the liaison office must file an Annual Activity Certificate (AAC), prepared by a chartered accountant, to the RBI verifying the office’s activities are within its charter. An AAC should also be filed with the Directorate General of Income Tax within 60 days of the close of the financial year.


Taxation rules applicable on Liaison Office


Where the liaison office creates a PE or establishes a business connection, the foreign company would become liable to pay tax on the profits, which can be attributed to the liaison office. But if liaison office doesn’t create any of the aforesaid relationship, liaison office will not attract any income tax in India.