How to Establish a Branch Office in India: Steps & Documentation Guide

Expanding your business to India can be an exciting venture. One effective way to establish a presence in India is by setting up a branch office. This comprehensive guide will walk you through what a branch office in India is, what activities it can undertake, the eligibility criteria for opening one, the steps and required forms for its establishment, tax obligations, compliance requirements, and frequently asked questions.

What is a Branch Office?

A branch office in India operates as an extension of a parent company which is based outside India, not as a separate legal entity. It represents the parent company and conducts business under its name. In India, branch offices are set up with the primary objective of expanding the reach of the parent company and enhancing its business outreach.

What Activities Can a Branch Office Do?

Branch offices in India are allowed to engage in activities that reflect those of the parent company. Here are some permissible activities:

• Import and export of goods
• Rendering professional or consultancy services
• Carrying out research work, in which the parent company is engaged
• Promoting technical or financial collaborations between Indian companies and the parent or overseas group company
• Representing the parent company in India and acting as buying/selling agents
• Rendering services in Information Technology and development of software in India
• Rendering technical support for the products supplied by the parent/group companies
• Foreign airline/shipping company operations

Eligibility to Open a Branch Office in India

To open a branch office in India, the foreign parent company must satisfy several conditions:

• The parent company must have a profitable track record during the immediately preceding five financial years in its home country.
• The net worth of the parent company should not be less than USD 100,000 or its equivalent.
• An application for opening a branch office must be submitted through a designated AD Category-I bank to the Reserve Bank of India (RBI), following the guidelines issued by RBI under FEMA, 1999.

These conditions ensure that only financially sound and reputable companies can establish a presence in India, thereby protecting economic interests and maintaining market integrity.

Steps and Forms to Open a Branch Office in India

Step-by-Step Process:

1. Approval from RBI: Initially, the approval must be obtained from the Reserve Bank of India (RBI) under the FEMA, 1999.
2. Registrar of Companies (ROC) Registration: Following RBI approval, the branch office must be registered with the ROC. The application for registration should be filed in Form FC-1 within 30 days of RBI approval.
3. PAN, TAN, and Other Registrations: Obtain PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number) from the Income Tax Department. Additionally, GST registration might be required based on the activities of the branch office.

Required Forms:

• Form FC-1 (for ROC)
• Various forms for PAN and TAN applications
• GST registration forms (if applicable)

Tax Rate and Compliances of a Branch Office

Tax Obligations:

Branch offices are taxable in India on their worldwide income at corporate tax rates applicable to foreign companies. For the current tax rate, please refer to the Indian Income Tax Department’s website.

Compliance Requirements:

• Annual filing of audited financial statements with the ROC
• Compliance with transfer pricing regulations if transactions occur between the branch office and its parent company
• Regular filing of GST returns if registered for GST
• Compliance with other statutory liabilities such as TDS (Tax Deducted at Source), Professional Tax, etc.

Documents Required to Open a Branch Office

Here’s a list of essential documents needed to set up a branch office in India:

• Certificate of Incorporation/Registration of the parent company
• Memorandum and Articles of Association in English, if not, duly translated
• Power of Attorney from the parent company in favor of the Indian representative
• Latest audited balance sheet and annual accounts of the parent company
• Banker’s Certificate
• Passport size photographs of the authorized Indian representative
• PAN card of the parent company

Relevant External Links:

1. Reserve Bank of India (RBI) – Guidelines for Foreign Companies to Open Branch Offices: Reserve Bank of India – RBI Guidelines for Branch Office

   • This link directs to the official RBI page where notifications and guidelines related to foreign exchange and setting up branch offices are regularly updated.

2. Foreign Exchange Management Act (FEMA) – Legal Framework: FEMA Regulations – Department of Revenue

   • The Department of Revenue provides comprehensive details on FEMA regulations, which govern the approval process for branch offices in India.

3. Ministry of Corporate Affairs (MCA) – Registration and Compliance: Ministry of Corporate Affairs – Company Forms Download Page

   • Useful for downloading necessary forms for the registration of a branch office in India, such as Form FC-1.