Contact No
+91-9465331815
+91-9465331815
Contact Email
cayogeshmehra@gmail.com
cayogeshmehra@gmail.com
A Liaison office works as a place in India which represents foreign company principally with the motive to understand and explore the business conditions, environment of business, understanding nature of market and conducting market research for the product of the parent company in order to provide and look for further information from prospective customers or vendors.
The purpose of setting up a liaison office is to represent in India the parent company, group companies, promotion of import or export from/to India, promotion of technical and financial participation of parent/group companies and to act as a communicative bridge between the parent company and Indian companies.
Liaison offices are known for the opportunities they provide to the foreign investors. It paves the way for foreign investors to explore the Indian market and set their footprint in the growing market place with the benefit of keeping their financial, legal, and administrative commitments low.The application and approval process for the formation of the liaison office in India is regulated by the Foreign Exchange Management Act (FEMA). Under the FEMA Act it is necessary for the foreign enterprises to take the approval of RBI’s Foreign Exchange Department in order to oprerate a liaison office in India.
As India is rapidly growing and progressing economies of the world, there are many multinational companies who are willing to invest in the Indian market and are always looking forward to establish their liaison office in India.
It is necessary for a parent company to have a beneficial track record of the past three years in a row and they should own a net worth of more than $50,000 attested by their auditors.
Parent company provides financial aid to all the operations of liaison office since liaison office are not allowed to earn any income in India.
The name must be similar to that of the foreign parent company, and for each new liaison office a new approval is needed from the Reserve Bank of India with complete justification.
Income tax authorities have the right to impose income tax on a liaison office.
Foreign Exchange Management Regulations, 2016 governs the establishment of place of business for a foreign company. It is important to fall under the criteria of below mentioned qualifications in order to set up a liaison office in India:
On receiving the complete set of documents the next step is to draft the following documents for the signature purpose by the applicant company and from the authorised signatory
A digital signature is equally valued as a paper signature under the information technology act. New process has made it mandatory to file all applications to the registrar of companies in digital format. The authentication of the application is proved through digital signature of the proposed shareholders and directors.
Liaison office application for a foreign company is filed in FNC. The application is filed to the Reserve Bank of India via AD Bank (Authorised Dealer). The AD bank has an important role since all the communication to the RBI is dispelled through them.
A request pertaining to the scrutiny of documents is sent to the foreign company’s banker. This process of sending request for the purpose of verification is also called swift based verification. Once the documents are confirmed from the foreign banker the application is presented to the RBI for the approval purpose. The RBI can also ask for the additional documents as the case may be.
A particular policy is followed for approving the liaison office in India by the AD Banker. Priority is given to the cases where automatic route is not available.
Once the company is formed its bank account is opened wherein the FDI should reach within 180 days of forming the company with advance announcement to Banker.
Income Tax department of India issues a unique 10 digit number, known as PAN number. Once the PAN number is obtained, the liaison office is eligible to open its bank account. And it is necessary for every taxpayer to obtain Tax Deduction Account Number to obey all the TDS norms.
On obtaining Bank Account and cheque book the need arises for a copy of the check for making application for GST registration and Import Export Code.
