Minimum Requirements and Eligibility:
- Parent Company’s Financial Criteria:
- Minimum net worth of USD 50,000 or equivalent.
- Profitable track record for the preceding 3 financial years.
Required Documentation from Parent Company:
- Certificate of Incorporation.
- Audited financial statements (last 3 years).
- Net-worth Certificate (certified by auditor).
- Board resolution authorizing LO setup in India.
- Permissible Activities:
- Promotion, market research, and networking.
- Building relationships, communication, and liaison activities.
- No income-generating activities or commercial trading permitted.
- Restrictions and Conditions:
- Cannot earn income or conduct direct commercial/trading activities.
- Expenses must be fully funded by the foreign parent through inward remittances.
- Must operate within the scope approved by RBI.
- Application Process and Timeline:
Activity | Approx. Timeline |
Preparation and submission of documents to AD Bank | 1-2 weeks |
RBI Approval through AD Bank | 3–6 weeks |
ROC Registration and filing Form FC-1 | Within 30 days of RBI approval |
Obtaining PAN & TAN (Tax numbers) | 1–2 weeks |
Bank Account Opening | 1–2 weeks |
- Taxation:
- Income Tax: No taxes if activities comply with RBI guidelines (no income generation). File a Nil income tax return annually.
- GST: Generally not required, as no revenue-generating activities occur. (However, GST registration can be required in rare cases if LO provides certain specific services.)
- Employment and Payroll:
- Can employ both local and foreign nationals.
- Payroll must be financed by the parent company through remittances.
- Liable for payroll compliances (EPF, ESI, TDS) in India.
- Local Office Requirements:
- Must have a local registered office address in India.
- Lease or rental agreement required for approval.
- Requirement of Local Resident Director/ Representative:
- Not compulsory to have an Indian director, but RBI strongly recommends appointing a local representative or manager who is resident in India for smooth operations.
- Personnel and Visa Considerations:
- LO can employ both local and foreign nationals.
- Expat employees require appropriate employment visas.
Summary of Minimum Criteria for Quick Reference:
Criteria | Requirement |
Parent Company’s Net Worth | Minimum USD 50,000 or equivalent |
Parent Company’s Profitability | 3 consecutive profitable years |
Commercial Activities Allowed | None |
Income generation | Not permitted |
Funding of LO Operations | Through inward remittance only |
Mandatory Local Director or Employee | No. But usually appoint local representative |
Employees Allowed | Yes, local and expatriate |
GST applicability | Usually not applicable |
Income Tax | Nil returns mandatory |
Office Space | Mandatory local registered office |
RBI Approval Validity | Typically 3 years, renewable |
1. What is a Liaison Office (LO)?
A Liaison Office acts as a representative office of a foreign company in India, primarily intended to explore business opportunities, promote business interests, and communicate between the foreign parent company and Indian entities.
2. Can a Liaison Office earn income in India?
No, a Liaison Office cannot earn income or engage in any direct commercial, trading, or industrial activities.
3. What are the permissible activities of an LO in India?
- Representing the parent company/group companies.
- Promoting exports/imports.
- Promoting technical and financial collaborations.
- Market research and communication.
Commercial activities are strictly prohibited.
4. Is there a minimum net worth requirement for the foreign company?
Yes. The foreign parent company must have a minimum net worth of USD 50,000 or equivalent and a profitable track record for the preceding three years.
5. Is appointing an Indian resident as a representative mandatory?
A Liaison Office acts as a representative office of a foreign company in India, primarily intended to explore business opportunities, promote business interests, and communicate between the foreign parent company and Indian entities.