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Establishment in India
of Branch, Liaison Office, Project Office, Site Office or other
Place of Business
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| 1. |
General
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i. |
To regulate the establishment
of a branch or office or other place of business in India by a person
resident outside India, the Reserve Bank has framed "FEM (Establishment
in India of a Branch or Office or other Place of Business) Regulations,
2000; |
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ii. |
"Branch" means (a) any establishment
described as a branch by the company; or (b) any establishment carrying
on either the same or substantially the same activity as that carried
on by the head office of the company; or (c) any establishment engaged
in any production, processing or manufacture; |
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iii. |
"Liaison Office" means a
place of business to act as a channel of communication between the
principal place of business or head office by whatever name called
and entities in India but which does not undertake any commercial/trading/industrial
activity, directly or indirectly, and maintains itself out of inward
remittances received from abroad through normal banking channel; |
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iv. |
"Project Office" means a
place of business to represent the interests of the foreign company
executing a project in India but excludes a Liaison Office; |
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v. |
"Site Office" means a sub-office
of the Project Office established at the site of a project but does
not include a Liaison Office. |
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| 2. |
Prior
Approval of Reserve Bank |
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i. |
Any entity resident outside
India may establish a branch or liaison office or project office or
any other place of business in India with the approval of Reserve
Bank; |
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ii. |
The Reserve Bank may impose
certain terms and conditions while granting approval, including condition
as to permissible credits and debits to the bank account in India.
The branch/office in India may deposit their temporary surplus funds
lying in their non-interest bearing account in term deposits for a
period not exceeding 6 months on furnishing an undertaking that the
maturity proceeds of the deposit will be utilised for their business
in India within 3 months of maturity. Such facility is not available
to shipping/airline companies; |
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iii. |
A banking company incorporated
outside India may open a branch or office in India if it has obtained
necessary permission under the Banking Regulation Act, 1949. No separate
permission under FEMA, 1999, is required. |
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| 3. |
Application
to the Reserve Bank |
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i. |
The application for obtaining
permission shall be made to the Reserve Bank in Form FNC1. In case
a non-resident person has secured a contract to execute a project
in India the application for permission to establish a project or
site office will also be made in Form FNC1. |
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| 4. |
Permissible
Activities |
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i. |
The permissible activities
which can be undertaken by a branch are specified in Schedule I and
for a liaison office are specified in Schedule II hereunder; |
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ii. |
A project or site office
has been permitted to undertake activities relating and incidental
to execution of the project in India. |
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| SCHEDULE
I |
SCHEDULE
I |
| Permitted
Activities for a Branch in India of a Person Resident Outside
India |
Permitted
Activities for a Liaison Office in India of a Person Resident
Outside India |
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| 1. |
Export/Import of
goods |
1. |
Representing in India
the parent company/ group companies. |
| 2. |
Rendering professional
or consultancy services. |
2. |
Promoting export
import from/to India. |
| 3. |
Carrying out research
work, in which the parent company is engaged. |
3. |
Promoting technical/
financial collaborations between parent/ group companies and
companies in India. |
| 4. |
Promoting technical
or financial collaborations between Indian companies and parent
or overseas group company. |
4. |
Acting
as a communication channel between the parent company and Indian
companies. |
| 5. |
Representing the
parent company in India and acting as buying/ selling agent
in India. |
| 6. |
Rendering services
in Information Technology and development of software in India. |
| 7. |
Rendering technical
support to the products supplied by parent/ group companies. |
| 8. |
Foreign airline/
shipping company. |
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| 5. |
Remittance of Profit or Surplus |
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i. |
Authorised dealers (through whom the remittance is effected) have been permitted to allow remittance of profit by a branch and remittance of surplus after the completion of the project by the project office, net of applicable India taxes, on production of prescribed documents, and establishing the net profit or surplus. |
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