ABOUT BRANCH OFFICE
Foreign companies engaged in goods and services abroad are allowed Branch Office registration in India. Businesses keen on setting up a branch office should meet the criteria as prescribed by RBI as per Master Directives.
BENEFITS OF FORMING BRANCH OFFICE IN INDIA
- An extension of foreign set up in India, better access to Indian Market without hefty infusion of capital in the new market.
- Represents and holds the overall brand value of the parent company
- Covered under a double tax treaty, not required to file separate tax returns.
- Perform revenue-generating activities in India subject to restrictions imposed by RBI
BASIC REQUIREMENTS FOR FORMING BRANCH OFFICE IN INDIA
- Managed by an Authorized representative of the parent company in India.
- Applicant must be a body corporate incorporated outside India
- Parent Company shall have a profitable track record during immediately preceding 5 years.
- The Net Worth of the parent company shall be not less than USD 1,00,000/ or its equivalent.
DRAWBACK OF OPERATING BRANCH OFFICE IN INDIA
- Compared to Indian Subsidiaries, the tax rate of e Branch Office is higher.
- Mandatory prior approval from RBI, application may take 45-60 days
- Branch Office cannot expand its activities or undertake any new trading, commercial, or industrial activity other than that is expressly approved by the RBI.
WHAT ALL YOU WILL GET FROM REGISTER YOUR STARTUP
- Certificate of Incorporation of Branch Office from Registrar of Companies
- RBI approval Letter
- One Digital Signature for Authorized Signatory
- PAN of the Branch Office
- TAN of the Branch Office
- Bank account opening documents
- ESI & EPF registration Letter
- Handbook on Taxations
- GST Registration
STEP-BY-STEP PROCESS AND CHECKLIST FOR ESTABLISHING A BRANCH OFFICE IN INDIA
STEP I: INFORMATION/DOCUMENTS REQUIRED FOR INDIAN NOMINEE DIRECTOR AND AUTHORIZED REPRESENTATIVE
For Indian Directors (with DIN):
- Self-attested PAN and Aadhaar card as proof of identity and residential address.
- Email ID and phone number.
- Passport-size photograph.
For Indian Directors (without DIN):
- Self-attested proof of identity: Passport, Driving License, or Voter ID.
- Self-attested proof of residential address: Bank statement (not older than two months).
- Email ID and phone number.
- Passport-size photograph.
- Duration of stay at the current address.
- Highest educational qualification.
- Occupation details.
STEP II: INFORMATION/DOCUMENTS REQUIRED FOR FOREIGN INDIVIDUAL REPRESENTATIVES
- Proof of Identity: Apostilled and self-attested copy of the Passport.
- Proof of Residential Address: Apostilled and self-attested copy of the utility bill (electricity or phone bill) or a bank statement (not older than two months).
- Email ID and phone number.
- Passport-size photograph.
Note: The current address proof must be notarized by a Public Notary in the country of residence and apostilled.
Documents not in English must be accompanied by certified translations.
STEP III: REGISTERED OFFICE DOCUMENTS
- Proof of the registered office address (utility bill of the premises, not older than two months).
- Lease deed or rent agreement, if applicable.
- No Objection Certificate (NOC) from the property owner.
- PAN of the property owner.
STEP IV: INFORMATION/DOCUMENTS FROM THE PARENT (FOREIGN) COMPANY
- Board Resolution: Apostilled or notarized resolution approving the establishment of the branch office in India and designating an authorized representative.
- Authorized Representative's ID Proof: Apostilled or notarized copy, if the individual is a non-resident of India.
- Charter Documents: Apostilled or notarized copy of the Memorandum of Association (MOA) and Articles of Association (AOA) of the foreign parent company.
- Audited Financial Statements: Copies of audited financial statements of the parent company for the last five years.
- KYC from Parent Company’s Banker: Verification documents such as bank statements and letters of recommendation.
STEP V: SUBMISSION OF FORM FNC TO RBI
The Form FNC (Foreign National Company) is mandatory for obtaining RBI approval for setting up a branch office. This form must be submitted through an Authorized Dealer (AD) Bank.
Key Requirements for Form FNC Submission:
- Completed and signed Form FNC.
- KYC documents from the parent company’s banker.
- Justification for establishing the branch office in India, specifying the proposed activities.
- Proof of parent company’s net worth (minimum USD 100,000).
- Details of the branch office’s business activities, including revenue forecasts.
- A declaration confirming adherence to FEMA (Foreign Exchange Management Act) and RBI guidelines.
Once submitted, the Authorized Dealer (AD) Bank forwards the Form FNC and supporting documents to the RBI for approval.
STEP VI: ROC REGISTRATION AFTER RBI APPROVAL
Once RBI approval is granted, register the branch office with the Registrar of Companies (RoC).
Documents Required for RoC Registration:
- RBI approval letter.
- Digital Signature Certificate (DSC) for the authorized representative.
- INC-9 Declaration: Apostilled or notarized copy of the declaration by the authorized representative and directors.
- DIR-2: Declaration from directors, along with identity and address proofs (apostilled or notarized).
- Certified English translation of foreign documents, if applicable.
STEP VII: POST-INCORPORATION REGISTRATION
- PAN and TAN Registration: Apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN).
- Bank Account Opening: Open a bank account in the name of the branch office.
- GST Registration: If the branch office will engage in the sale of goods or services.
- Import Export Code (IEC): Obtain from the Directorate General of Foreign Trade (DGFT) for import/export operations.
Key Notes on Compliance
Apostilled or consularized documents are required for foreign-origin submissions.
Ensure that all declarations and forms, including Form FNC, comply with RBI and FEMA guidelines.
Maintain proper records to streamline regulatory audits and annual reporting requirements.
POST-INCORPORATION COMPLIANCE FOR A BRANCH OFFICE (BO) IN INDIA
Once a Branch Office (BO) is established in India, it must comply with various regulatory requirements under Indian laws, including filings with the Reserve Bank of India (RBI), Income Tax Department, Registrar of Companies (RoC), and Goods and Services Tax (GST) authorities. Below is a comprehensive guide to the post-incorporation compliance for a Branch Office:
- Reserve Bank of India (RBI) Compliance
Annual Activity Certificate (AAC):
Submit the AAC certified by a Chartered Accountant to the designated AD Category-I Bank and the RBI.
The certificate must confirm that the activities undertaken by the Branch Office are as per the approved scope of operations.
The AAC is due within six months of the end of the financial year.
Reporting of Transactions:
Maintain records and submit reports on inflows and outflows of funds between the parent company and the Branch Office, ensuring compliance with FEMA regulations.
- Registrar of Companies (RoC) Compliance
Annual Filing:
File Form FC-3 (Annual Accounts and List of Place of Business).
File Form FC-4 (Annual Return) within 60 days of the financial year-end, detailing activities and financial transactions of the Branch Office.
3. Income Tax Compliance
Permanent Account Number (PAN):
- Ensure the Branch Office has a PAN for tax-related filings.
Tax Filing:
- File annual Income Tax Returns, including tax audits where applicable.
- Comply with Transfer Pricing regulations if transactions with the parent company occur.
Tax Deduction at Source (TDS):
- Deduct and deposit TDS for employee salaries, contractor payments, and other applicable transactions.
- File TDS returns quarterly.
4. Goods and Services Tax (GST) Compliance (if applicable)
GST Registration:
- Obtain GST registration if the Branch Office is involved in providing taxable supplies in India.
Regular GST Filings:
- File monthly or quarterly GST returns (GSTR-1, GSTR-3B, etc.) depending on turnover.
- File annual GST return (GSTR-9) if applicable.
5. Financial Compliance
Audit of Accounts:
- Ensure the Branch Office’s accounts are audited annually by a qualified Chartered Accountant.
Repatriation of Funds:
- Maintain detailed records of funds remitted to the parent company and ensure compliance with FEMA guidelines for repatriation.
6. Other Key Compliances
Labour Laws:
- Comply with applicable labour laws, including Provident Fund (PF) and Employee State Insurance (ESI), if the Branch Office employs personnel.
Local Regulations:
- Adhere to state-specific laws, such as Shop and Establishment registration, if required.
Employee Settlements:
- Ensure proper management of payroll, tax deductions, and employee benefits like gratuity, if applicable.
- Other Key Compliances
Labour Laws:
- Comply with applicable labour laws, including Provident Fund (PF) and Employee State Insurance (ESI), if the Branch Office employs personnel.
Local Regulations:
- Adhere to state-specific laws, such as Shop and Establishment registration, if required.
Employee Settlements:
- Ensure proper management of payroll, tax deductions, and employee benefits like gratuity, if applicable.
PROCEDURE FOR CLOSING A BRANCH OFFICE IN INDIA
- Obtain Approval from RBI
- Submit an application to the Reserve Bank of India (RBI) through the designated Authorized Dealer (AD) bank.
- Include the following documents in the application:
- Copy of the initial RBI approval for setting up the Branch Office.
- Justification for closing the Branch Office.
- Auditor’s certificate confirming that no liabilities are outstanding.
- Settle All Liabilities
- Ensure all statutory dues, employee benefits, creditors' payments, and other liabilities are settled before closure.
- Obtain a "No Dues Certificate" from concerned parties if applicable.
Obtain Tax Clearance
- Submit an application to the Income Tax Department for a No Objection Certificate (NOC).
- Comply with Registrar of Companies (RoC) Requirements
- File necessary forms with the RoC under the Companies Act, 2013, for cessation of the Branch Office:
- Form FC-2: For reporting the closure of the Branch Office.
- Attach documents such as the board resolution of the parent company approving the closure, a copy of the RBI approval, and a statement of accounts.
- Close Bank Accounts
- Close all local bank accounts of the Branch Office after ensuring that all transactions have been completed.
- Obtain a confirmation letter from the bank regarding the closure of accounts.
- Repay or Repatriate Funds
- Repatriate unused funds back to the parent company after settling all obligations.
- Submit an application to the AD bank for repatriation along with:
- Auditor’s certificate verifying remittance calculations.
- RBI and tax clearance certificates.
- Inform Employees
- Notify employees in advance as per the terms of employment agreements.
- Settle all dues, including salaries, gratuity, and provident fund contributions.
- Cancel Licenses and Registrations
- Surrender or cancel any licenses, GST registration, or permits obtained during the operation of the Branch Office.
- Prepare Final Compliance Documents
- Finalize audited financial statements up to the date of closure.
- Ensure all compliance filings with tax authorities, RBI, and RoC are completed.
- Submission of Final Report to RBI
Submit a comprehensive report to the RBI through the AD bank detailing the closure process, including all supporting documents such as:
Auditor’s certificate.
- Tax clearance certificate.
- Final audited accounts.
- Proof of settlement of all liabilities and repatriation of funds.
It is advisable to consult a legal or professional firm to ensure all compliance requirements are met during the closure process, as non-compliance may lead to penalties. For assistance, you can contact info@registeryourstartup.com.