Indian Liaison office: When to establish one?
About Liaison Office
Liaison Office as defined by the FEMA (Foreign Exchange Management Act) is considered to be a business place to act as communication channel between Head Office or Principal business place by whatever Indian entities or whatever name known, but does not participate in any industrial/trading/ commercial activity, either indirectly or directly and also maintains itself from foreign inward remittances through regular banking channel.
RBI’s master circular depicts Liaison Office to undertake liaison activities only, which is, to act as communication channel between parties located in India and Head Office in foreign countries. But business activities cannot be held in India or income earned here. It is through the foreign exchange from external Head Office that Liaison Office expenses need to be met. Hence, its role gets limited to gathering information with regards to potential market opportunities and offering valuable information to potential Indian customers about the company and the service and products offered. It is for a three period that permission is allowed to establish such offices, which could be extended periodically by ‘AD Category-I bank’.
Following activities can be undertaken by the Liaison Office in India
- Export/Import promotion from/to India
- Representing group companies/parent company in India
- Acting between Indian companies and parent company as communication channel
- Promotion of financial/technical collaborations amongst group/parent companies in India
Steps to establish Liaison Office
It is possible to register online liaison office in India without much hassle. To set up liaison office and to ensure its proper functioning, there will be required different types of registrations and approvals from the different government authorities.
- Obtain RBI approval
- Designate bank & branch, where post approval account is to be opened up and will act as AD Bank (Authorized dealer bank) for the Indian Liaison Office.
- The RBI (Reserve Bank of India) is to be submitted with all necessary documents and filing of applications through AD bank.
- Obtain ‘Establishment of Business Place in India’ Certification with proper application to ROC.
- Registration application with the Income Tax (IT) Authority for PAN.
- Registration application with the Income Tax (IT) Authority for TAN.
- Obtain account number with a nationalized bank
- Depending upon location, register under Shop & Establishment Act
- Depending upon location, register under Professional Tax
- If samples need to be imported apply for Import Export Code
It is the RBI that grants initial approval for establishing Liaison Office (LO) to set up in India for a period of three years. The extension can be applied by the LO for the same to authorized dealer bank. Consulting the RBI, the AD bank is said to have the power to permit extension of the LO operations for another three year period, which is subject to certain compliance requirement conformations. Extension is to be applied by the LO for minimum 1-2 months prior to expiry of initial time period.
One can contact the industry experts to get proper and valid liaison office number India quickly and effortlessly.