In essence, a foreign company's operations expanded into India with establishment and registration of a branch office. This keeps the foreign company's status as a distinct legal entity intact while enabling it to carry out business operations in the nation. A foreign business must go by the guidelines established by the Ministry of Corporate Affairs (MCA) and the Reserve Bank of India (RBI) when it creates a branch office in India and branch office registration in India. Supporting and advancing the parent company's business interests in India is the primary goal of a branch office. It's crucial to understand that a branch office registration in India has the authority to conduct business in India, in contrast to a liaison office.
Its scope is restricted to the activities carried out by the parent firm, which may include trade, technical assistance, consulting, R&D, and acting as an intermediary. It's important to remember that having a branch office entails that the directors of the parent business located abroad are accountable for any decisions made by the branch office in India, including both good and bad ones. For this reason, a lot of businesses would rather create a wholly-owned subsidiary in India.
Eligibility for opening a Branch office in India
Branch office registration in India shall be commenced if they fulfill certain conditions, a person who lives outside of India may open a branch office there. These prerequisites include a minimum net worth of USD 100,000 or a comparable amount and a history of profitability over the previous five fiscal years in their native nation.
There is, however, an exemption for people or organizations that are subsidiaries of other businesses and are not financially stable. If the parent firm satisfies the required standards for profit and net worth, they may submit a Letter of Comfort in such circumstances. This letter offers assurance and assistance for the financial operations of the branch office in India.
Step-by-step process to Set up a Branch Office in India
Applying to the RBI through an Authorized Dealer (AD) bank
Using an Authorized Dealer (AD) bank to apply for the Reserve Bank of India (RBI) is the first step towards opening a branch office in India. The applicant and the RBI are connected through the AD Bank. A copy of the parent company's certificate of incorporation, a board resolution authorizing the branch's establishment, and information on the anticipated operations of the branch office should all be included in the application.
KYC verification from the parent company's banker
The parent firm must submit Know Your Customer (KYC) information from its banking institution as part of the application procedure. Bank statements, other pertinent financial data, and a letter of recommendation are frequently included in these records. The AD Bank examines these records to confirm their legitimacy and evaluate the parent company's financial standing.
Prior authorization from RBI in extraordinary situations
In the unusual event that the branch office's scheduled operations conflict with the RBI's automated process, prior authorization from the RBI may be required. The applicant must submit a thorough and in-depth reason for their request in order to receive this permission. The application will be thoroughly evaluated by the RBI, which will decide on its merits.
Branch Office Registration with the Registrar of Companies (ROC)
The following stage is to register the Branch Office with the Registrar of Companies (ROC) in the particular state where it will be situated, after the RBI has approved its formation. The RBI authorization letter, the parent company's certificate of incorporation, the company's articles of association and memorandum, and any supporting documentation are among the requirements that must be completed for this registration to be completed. The applicant must also pay the relevant fees and submit all necessary paperwork.
Tax deduction number, Pan card, and bank account opening:
The branch office set up should apply for a Permanent Account Number (PAN) from the Income Tax Department after registering with the ROC. To undertake financial activities and guarantee conformity with tax legislation, a PAN card is necessary. In addition, the branch office needs to get a Tax Deduction Number (TAN) in order to allow the deduction of taxes at the source. To make its financial operations easier, the branch office must additionally open a bank account in India.
Registration for import export codes and GST
It is necessary for the branch office to register for the items and Services Tax (GST) if it sells items or provides services. GST is an indirect tax that is applied on the sale of both goods and services in India. Additionally, if the branch office set up plans to import or export goods, it must obtain an Import Export (IE) code from the Directorate General of Foreign Trade (DGFT). All companies that import or export goods must have this Internet Explorer code.
Document required for Setting up a Branch Office in India:
The following is a detailed list of documents required towards Branch Office Set up in India:
- The board of the corporation has officially approved the a branch office set up in India.
- The registrar of companies issues a certified evidence of incorporation attesting to the business's legitimate existence.
- An accompanying letter outlining the rationale for opening a branch office in India and offering more details.
- a formal request for permission to open a branch office in India made to the RBI.
- Articles of Association (AOA) and Memorandum of Association (MOA)
- first form that includes the planned project office location in India as well as basic firm details.
- a document that certifies the completeness, accuracy, and conformity of the data submitted.
- Details regarding the company's background, line of work, and principal investors.
- To register a corporation with the ROC, the directors' names and details must be provided.
- Director's declaration confirming compliance with legal requirements and regulations.
International businesses wishing to investigate the Indian market, comprehend its economic potential, and increase their footprint here may find it wise to a Branch Office set up here in India.
How SKMC Global Can Help?
At SKMC Global, we understand that establishing a branch office in India is not just about legal compliance; it's about enabling foreign companies to make a seamless and successful entry into the Indian market. Here's how SKMC Global can assist at every crucial stage of setting up a branch office:
- Consultation and Regulatory Expertise: Our process begins with a comprehensive consultation, where we help foreign companies navigate the regulatory landscape, understand the market dynamics, and plan their entry strategy. We provide guidance on the most effective approach to achieve their business goals in India.
- Reserve Bank of India (RBI) Approval: We assist in the preparation of the application for RBI approval, ensuring that all necessary documents are in order and that the company's proposed activities align with the local regulatory framework.
- Ministry of Corporate Affairs (MCA) Compliance: SKMC Global helps in obtaining necessary approvals and compliance with MCA regulations, ensuring the proper incorporation of the branch office in India.
- Financial Documentation: We guide foreign companies in preparing comprehensive financial documents that meet RBI requirements for establishing a branch office, streamlining the approval process.
- Legal and Financial Compliance: Our experts facilitate the procurement of a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN), and assist in opening a dedicated business bank account, ensuring a smooth financial operation in India.
- Operational Autonomy: We support the branch office in attaining operational autonomy while maintaining clear communication with the parent company, ensuring alignment of goals and strategies.
- Local Networking: SKMC Global can assist foreign companies in establishing local contacts and partnerships, enabling them to navigate the market effectively and explore growth opportunities.
Compliance and Reporting: Our dedicated team ensures that the branch office adheres to Indian compliance requirements, including annual filings and financial disclosures, allowing foreign companies to operate legally and transparently in India.