Branch Office Registration
India is among the world’s largest consumer markets and top global economy. The fact that India is a fast-paced developing economy makes it an attractive destination for corporates all around the globe to invest and have commercial ventures in India. Hence, we see a growing number of foreign corporates have their branch office registration in India. The purpose of opening such a branch is to expand their business interests in India.
The Reserve Bank of India is the approval authority for registration of branch office. The establishment of the branch office is regulated under Section 6(6) of the Foreign Exchange and Management Act 1999. In addition, the RBI master direction prescribes the rules regarding governance, competitive authorities, and reporting requirements.
The branch office registration gives a foreign company the right to operate as a legal business entity in India. The branch office can carry out similar business activities as conducted by the parent company in their homeland.
Though, when it comes to manufacturing activities, BO is restricted. For example, a branch office cannot conduct manufacturing activities directly though it can sub-contract these activities to an Indian manufacturer.
Eligibility Criteria
For Setting up Branch Office in India, the company must fall under the Following Criteria:
- The net worth of the foreign parent company should be above $ 1,00,000
- The company must have a profitability track record of the past five years.
- The company is engaged in above mentioned Prescribed Activities of the Branch Office in India
Prescribed Activities of Branch Office in India
- It can conduct import & export of goods
- Provide professional and consultant services
- To conduct research activity in all those spheres where the parent company is already actively involved.
- Boosting technical/financial collaboration on behalf of the parent company
- Working as a representative of a parent company in India and performing work of a buying/selling agent
- Delivering IT services and developing software in India
- Indulging in the service of technical support for the products supplied by the parent company
- To work as an approved representative for a foreign shipping or airline company in India
Points to Consider for Branch Office setup in India
The name of the Branch Office must be similar to that of the parent company. Below is the list of other crucial facts that one should keep in mind before applying for branch office registration:
- Net Worth Requirement
A foreign parent company must have a beneficial track record of the past five working years in a row with a net worth of more than $ 1 00,000 aptly mentioned in the financial statement.
- Profit Remittance Allowed
The amount of profit earned by the branch office can be remitted from India to the parent company once all taxes are cleared, and an audit of all books of accounts is done.
- Name of Branch Office
A branch office must share the same name as a parent company.
- Taxation in India
The income tax applicable on the profits of the branch office of the foreign parent company in India is 40%, surcharges are also applicable. GST is imposed on the supply of goods and services.
- Registration timelines
The estimated timeline is 3 to 4 weeks. However, it can vary from case to case.
- Annual filing
The branch office is expected to be compliant with the filing requirements of the Ministry of Corporate Affairs, ROC, and Income tax department.