Procedure for Opening Branch Office by Foreign Companies

The Reserve Bank of India, with regard to manufacturing and trading activities in the overseas countries, permits opening of a Branch Office by Foreign Companies in India. The foreign companies set up their business operation units in India in the form of branch offices.

An Overview of Procedure for Opening Branch Office by Foreign Companies-

A prior permission from Reserve Bank of India (RBI) is a necessary factor for opening a branch office by a foreign company.

The branch office of a foreign company is not allowed to get involved in any new commercial, trading, or industrial activities except the ones with RBI approvals.

The expenses in the branch offices are to be taken by the funds allotted to them or through normal banking channels. The branch office of a foreign concern is not allowed to accept any deposits in India. The earnings from commissions by the branch office in India from the overseas parties will work on a repatriation basis through normal channels of banking.

Activities of Branch Offices by Foreign Companies

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Branch offices in India by foreign companies are allowed to undertake the following activities -

• Import and export of goods.
• Executing research work through R&D units in India in association with the parent firm.
• Providing consultancy services.
• Promoting technical as well as financial collaborations between the parent group and the Indian companies.
• Act as representative and buying and selling agents, of the foreign company in India.
• Technical support.
• Providing services in the fields of information technology and development of software in India
• Branch offices of foreign shipping or airlines companies are allowed in India.

Application Procedure for Opening Branch Office by Foreign Companies-

Foreign companies need to file an application with the Reserve Bank of India (RBI) for opening a branch office in India. Certain specific information that needs to be furnished in this application include -

• Global history of operations of the company.
• Proposal of activities and interest areas in India.
• Reasons for opening office.
• For exchange issues.

The branch offices set up by the foreign companies in India are allowed to carry out the payment issues outside India under the regulations of RBI. They do not need to maintain any reserves in India. In cases of possessing income or profits in India, the branch offices can send back profits directly to their Head Office, which is located in the foreign country, and they do not need any prior approval from RBI for that.

Last Updated on 05/07/2011