Foreign Liaison Office – On Overview
If you are looking for opening a representative office in India for representing your organisation in India or for marketing and liaison purposes then Foreign Liaison Office is the best suited for your organisation. The main benefit of liaison / representative office is that it is not liable to any taxes in India as it is not undertaking any business activity in India. Its scope of work is limited to liaison and marketing for parent company. It is however required to deduct tax at source wherever applicable.
Activities Permitted for Foreign Liaison Office
It is subject to various restrictions and can only conduct activities permitted by the Reserve Bank of India at the time of granting permission for opening liaison office or if permitted later. It can only undertake the following activities in India.
- Representing the Parent Company in India
- Promoting/ Liaison for Export out of India
- Promoting/ Liaison for Import into India
- Representing Parent company for felicitating technical / financial collaboration between parent company and Indian company
- Acting as a communication channel between Parent Company and Indian Companies
It cannot undertake any activities other than the activities mentioned above subject to the permission of Reserve Bank of India. Some of the activities that a Liaison Office cannot undertake in India are given below. This list is not exhaustive and only illustrates some of the activities that a Liaison Office cannot undertake in India.
- Undertaking Manufacturing Activities
- Trading Activity
- Import of Goods
- Export of Goods
- Entering into contract on behalf of Parent Company
- Providing quotations on behalf of Parent Company
Other Features of Foreign Liaison Office
- A Foreign Liaison Office is not subject to Indian Taxes (except as mentioned above)
- A Foreign Liaison Office cannot undertaken any Commercial / Business Activities in India
- Parent Company is required to bear all the expenses of the Liaison Office
- A Liaison Office can neither borrow nor lend money
- Foreign Liaison Office is now required to file annual return with Income Tax Office but is not subject to payment of any Income Tax
Foreign Liaison Office Setup Procedure
A Foreign Liaison Office is a special business setup mode which can be setup only with prior permission of Reserve Bank of India (RBI). RBI looks at various factors before granting permission to any company to setup liaison office in India which include (but are not limited to) background of the parent company, background of the directors, country of incorporation of parent company, proposed activities of liaison office etc.
An application for registration of foreign liaison office is required to be made in Form FNC-1 along with the following documents:
- Form FNC-1 in Triplicate
- Letter from the Principal officer of the Parent Company to RBI
- Letter of Authority from the Parent Company in favour of local representative.
- Two copies of the English version of the Memorandum and Articles of Association (Charter Documents) of the Parent Company attested by Indian Embassy/Notary Public in the country of registration.
- The latest audited Balance Sheet of the Parent Company.
RBI may ask for any further documents as may be necessary in addition to these documents.
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