With the popularity of Make In India, many foreign companies are showing interest in opening an office in India — the reason being that India is one of the fastest growing markets and has some of the best human resources. As the name suggests, a Liaison Office in India is registered with the purpose of understanding the Indian market and work opportunities. The Liaison Office helps a business understand the Indian market and develop strategies to grab business potential. A Liaison Office is not allowed to make profit in India — it can only incur expenses from remittances received from its foreign head office. Simply put, a Liaison Office is not allowed to earn income in India.
The permission for setting up a Liaison Office in India is approved by the RBI, but as per recent changes, applications for a Liaison Office are routed through the AD, i.e. Authorized Dealers.
Highlights of Liaison Office Registration in India
- The office shall have the same name as the parent company
- The governing body for a Liaison Office in India is the RBI (Reserve Bank of India)
- There is no separate ownership of a Liaison Office in India — it is just an extension of the existing company in the foreign country
- A Liaison Office is allowed to incur expenses from funds received from the head office
- It is suitable for companies looking to test the Indian market
- A Liaison Office cannot undertake business in India and make profit
Activities Permitted to a Liaison Office in India
A Liaison Office can act as a communication channel between the foreign head office and parties in India. However, while doing so, the office needs to take care that it does not undertake business activity in India or make profit in India.
- Representing the parent company / group companies in India
- Promoting export / import from / to India
- Promoting technical / financial collaborations between parent / group companies and companies in India
Prerequisites for a Liaison Office in India
Profitable Company
The company looking to start a Liaison Office in India shall have a profitable track record during the immediately preceding three years in the home country.
Net Worth
The net worth — i.e. the 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 — shall be not less than USD 50,000.
Compliances for a Liaison Office of a Foreign Company in India
- Filing of Annual Return compliances and Balance Sheet with the Registrar of Companies
- Maintenance of complete books of account for the activity carried out in India
- Filing Annual Activity Certificates from the auditors, to be submitted to the Reserve Bank of India
- Audited financial statements, including Receipts and Payments A/C, shall be filed with the Directorate of Income Tax
- Intimating any change in the constitution of the foreign company to the Reserve Bank of India & ROC
- Intimating any change in the directors of the foreign company to the Reserve Bank of India & ROC
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