A foreign company’s branch office can start full-fledged operations in India after obtaining permission from the RBI and registration with the ROC. Setindiabiz offers expertise in establishing a Branch Office, Tax Filings, and payroll.
We are a professional consulting firm specialising in company registration, taxation, accounting, payroll, compliance, and intellectual property rights (IPR) services to assist new and existing businesses in India. We provide our professional services at a reasonable fee, explaining the eligibility, process, and documents required for setting up and maintaining a business. We also prepare and file necessary applications with relevant government agencies such as the Registrar of Companies (ROC) and the Income Tax Department. We do not directly provide government documents or represent ourselves as a government agency.
1. Five Years of Profitable Track Record
2. Net Worth Should be more than USD 100,000/-
2-3 Months
Resident Indian is Required with Aadhar Number
An application in the FNC-1 Form needs to be submitted to the Reserve Bank of India (RBI) through an Authorised Dealer (Bank) to seek approval from the RBI. The approval under the automatic route is granted if the sector’s activities are eligible for 100% Foreign Direct Investment (FDI). However, in all other cases, the approval process may take additional time as it is processed under the Government approval route.
A branch office is a great way for a foreign company to expand its operations in India. By setting up the branch office in India, the foreign company does not create a new legal entity but obtains permission to operate as a foreign-incorporated legal entity in India. The Branch office carries exactly the same name and identity in India; however, it can undertake only a few permitted activities that are allowed for a Branch Office in India. For instance, it cannot engage in manufacturing, processing, and retail trading activities. To establish a Branch Office in India, prior permission from the RBI is required; we help foreign companies receive the approval to establish a Branch Office in India.
To register a branch office in India, the foreign company must ensure that it meets the minimum criteria prescribed under Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016 (Notification No. FEMA 22(R)/ 2016-RB). The criteria for setting up the branch office of a foreign company is concerned with the minimum net worth, profitability track record and the proposed business activities in India. The table below provides detailed information.
The foreign parent company must have a net worth of more than $100,000/- supported by duly audited financial statements. The network means the paid-up capital plus free reserve.
The Foreign company must have a track record of profit-making for five years immediately preceding the date of application for RBI approval. We advise you to check the audited financial statements to verify if there is a loss in any of the previous five financial years.
The Indian Branch Office shall be established and will carry the same name and identity as the establishment of a Branch Office. No new legal entity gets incorporated in India, but a foreign-incorporated entity obtains permission to operate in India by following the prescribed procedure.
The branch office in India must carry out the same activities as its parent company; however, the activities need to be within the permitted list of activities as per the RBI notification. The permitted list of activities for a Branch Office is discussed in a separate section.
Unlike a wholly owned subsidiary which can do any business activity as a separate legal entity in India, the Branch Office of a foreign company can undertake only a limited set of activities. You are advised to read our analysis on the permitted list of activities for a Branch Office at https://www.setindiabiz.com/permitted-activities-of-branch-office-india Following is the list of permitted activities in India.
Export/Import of Goods Professional and Consultancy Services Research and Development Fostering Collaborations Representation of The Parent Company IT and Software Development Technical Support Representing Foreign Airlines/Shipping CompaniesThe approval for the above listed business activities to a Branch Office is processed under the automatic route, whereas in case the proposed business is beyond the scope listed, a detailed application can be filed to seek specific government approval, which may be given to the sole discretion of the government of India.
Documentation is a crucial aspect of Branch Office Registration in India. At different stages of establishment, very basic documents are filed with the RBI and the Registrar of Companies to satisfy the applicant’s eligibility, the directors’ KYC, and the Indian Resident Authorized Signatory. Here is the list of documents required to establish a Branch Office in India.
Duly Filled Form FNC-1Board ResolutionCertificate of IncorporationArticles or Charter of parent companyAudited financial statements of 5 YearsBankers Standing ReportList of Shareholders & DirectorsKYC of all DirectorsColour PhotoPAN CardAadhar CardPassportAddress Proof not older than Two MonthsProof of Registered Address of Branch Office (Utility bills / Rent Agreement / Lease Agreement / Property Tax Receipt)NOC From the OwnerDocuments that originate from overseas, such as the applicant certificate, charter, financial statements, board resolution, etc., are required to be legalised by attestation before the notary, Indian embassy, or apostille as per the applicable method of legalisation of the documents. Please refer to our Article on Legalisation of Documents
Establishing a Branch Office in India is an entirely online process that involves preparing and legalising documents and filing the FNC-1 application with the RBI through an Authorised Dealer (AD) Bank. The AD bank is an intermediary between the RBI “Regulator” and the applicant “Foreign Company”. After the permission to establish the branch office is granted, the foreign company then registers with the ROC. Following are the logical steps that you should take to establish a Branch Office in India.
The first step should be to check the eligibility of the foreign company and arrange all the required documents for Branch Office Registration in India. We can assist with drafting the Documents are required to file the application and seek the approval of the RBI. After the documents are properly drafted, the same needs to be legalised by a Notary Attestation in case the applicant is from a Commonwealth Country or Appostile in case the applicant country is party to the Hague convention. In all other cases, the documents originating or executed in a foreign country would require attestation by the Indian Embassy or Couselete office.
The Reserve Bank of India is the regulatory authority that issues permission to establish a Branch Office in India. For that purpose, the application is filed in Form FNC-1, along with all the supporting documents. The AD Bank verifies the applicant’s KYC and examines the application for completeness. In the process, the AD Bank may seek clarification or change some documents.
In general, the AD Bank is authorised by the RBI to approve the application for the establishment of the Branch office and then submit the application for the generation of a unique identification number (UIN) for the Branch Office, provided the applications are for the sector where 100% FDI is permitted. However, in the following situation, the RBI conducts a comprehensive review of the application and grants its permission on a case-to-case basis.
Once the AD Bank or the RBI grants permission to establish the Branch Office, the next step is to register it with the Registrar of Companies (ROC) within 30 days of the approval. The application to ROC is filed in form FC-1 along with the foreign company’s documents and the RBI’s permission.
The next step is to open a bank account for the branch office to start its operations. The Indian branch can receive remittances from the parent company or from the customers. The GST Registration is needed to provide services in India or to sell goods. You may also need an Import Export Code (IEC).
Depending on the nature of business activities and the location of the office of the Branch office, the Branch Office may need some specific registrations or licences such as Shops and Establishment Registration, Professional Tax Registration, Registration with the Labour Welfare Fund (LWF) etc, FSSAI or Drug Licences etc. EPF Registration, ESI Registration.
The branch office of a foreign company in countries like Pakistan, Afghanistan, Iran, China, Bangladesh, Sri Lanka, Hong Kong or Macau needs to register itself with the office of the Police Superintendent in whose jurisdiction the office of such branch office is situated.
The branch office of foreign corporations is subject to a higher rate of base income tax of 40% in comparison to domestic companies or the subsidiary of foreign companies, which is subject to tax at 15-22% plus an applicable surcharge. The Branch office is taxed for the Income Received or accrued in India in the capacity of the foreign company’s Permanent Establishment (PE). The following shall be the net Tax rate after considering the surcharge and cess.
| No. | Taxable Income | Effective Tax rate |
|---|---|---|
| 1 | Below INR 10 Million | 41.60% |
| 2 | Below INR 100 Million | @42.43% |
| 3 | Above INR 100 Million | 43.68% |
The branch office has a limited scope of operation in terms of permitted activities and is subject to a very high Income Tax rate. On the other hand, Incorporating a wholly-owned subsidiary makes greater sense in view of its ability to undertake all kinds of business activities at par with any other domestic company. The Income tax for a subsidiary of a foreign company shall be 15% in the case of manufacturing activities and 22% in the case of other activities.
The foreign company’s branch office must adhere to the relevant provisions of the Companies Act, FEMA, and Income Tax Act, among others. These laws mandate that annual returns be submitted to regulatory bodies such as RBI, the Income Tax Department, and the Registrar of Companies. The table below attempts to provide the most common annual filings along with their due dates and the relevant regulatory body.
| Name of Return | Last Date | RBI | ROC | Income Tax |
|---|---|---|---|---|
| Form FC 4 | 30 May |  |  | |
| Statutory Audit | 30 September | | | |
| Form FC 3 | 30 September | | | |
| Annual Activity Certificate (AAC) | 30 September | | | |
| Income Tax Return (ITR) | 30 September | | | |
| Tax Audit | 30 October | | | |
The branch office is a Permanent Establishment of the foreign company and is registered with the ROC. It must file two annual returns to the Registrar of Companies (ROC) office. The annual filing to the ROC is mandatory for every Branch office.
The branch office is a Permanent Establishment of the foreign company and is registered with the ROC. It must file two annual returns to the Registrar of Companies (ROC) office. The annual filing to the ROC is mandatory for every Branch office.
