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Liaison / Branch / Project Offices of foreign entities in India

Disclaimer : In case of any inconsistency(ies) between FAQ and FEMA notification(s)/Master Directions(s)/AP DIR Circular(s) latter shall prevail.

These FAQs attempt to put in place the common queries that users have on the subject in easy to understand language. However, for conducting a transaction, the Foreign Exchange Management Act, 1999 (FEMA) and the Regulations made or directions issued thereunder may be referred to. The relevant Principal Regulations are the Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016 issued vide Notification No. FEMA 22(R)/2016-RB dated March 31, 2016. The directions issued are consolidated in Master Direction on Establishment of Branch Office (BO)/ Liaison Office (LO)/ Project Office (PO) or any other place of business in India by foreign entities.

Q.1. What action the AD is required to take in case of any adverse reporting in Annual Activity Certificate (AAC) of LO/BO or non-submission of AACs? +

Ans. In case the designated AD Category I bank notices any adverse findings by the auditor in respect of LO/BO or the LO/BO is defaulting in submission of AACs, then the same should be immediately reported to the Reserve Bank.

Q.2. Can LO/BO maintain more than one account in India? +

Ans. No, if an LO/BO wants to open more than one account it has to obtain prior permission of the Reserve Bank through its AD Category I bank justifying the reason for additional account.

Q.3. Are LO/BO/PO required to register/report with Police authorities? +

Ans. Only applicants from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong, Kong, Macau and Pakistan shall have to register with the State Police authorities. Copy of approval letter for persons from these countries shall be marked by the AD Category I bank to the Ministry of Home Affairs, Internal Security Division – I, Government of India, New Delhi for necessary action and record. All other countries are exempted from registering with the State Police authorities.

Q.4. Can an LO/BO/PO acquire property for its operation? +

Ans. The BO /PO of a foreign entity, excluding an LO, are permitted to acquire property for their own use and to carry out permitted/incidental activities but not for leasing or renting out the property. However, entities from Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, Nepal, Bhutan, China, Hong Kong and Macau require prior approval of the Reserve Bank to acquire immovable property in India for a BO/PO. BOs/LOs/POs have general permission to carry out permitted/ incidental activities from leased property subject to lease period not exceeding five years.

Q.5. Can an LO upgraded into BO, continue to have same PAN and bank account? +

Ans. Yes provided the bank account is re-designated as a BO account.

Q.6. Whether credit facility can be provided in foreign currency for PO? +

Ans. Yes, the AD bank should ensure compliance to the extant instructions issued by the Department of Banking Regulation.

Q.7. Once the PO has been set up in India for executing a specific project in India under general permission, at times, the overseas entity is awarded another project by the same or a different project awarding entity. In view of the same, can maintaining of bank account at entity level, filing of AACs, complying with submission of closure documentations on completion of the project and maintaining of books of accounts at entity level be complied with at PO entity level instead of at specific project level? +

Ans. No

Q.8. Can agents of overseas shipping or airline companies continue to maintain foreign currency account with the designated AD Bank in India after such airline or shipping companies have set up BO in India? +

Ans. Yes, however, BO’s transactions should be restricted to its designated INR account and it should not put any transactions through the agent’s foreign currency account.

Q.9. Whether there is any specific format in which application with State Police has to be filed for registration? +

Ans. Yes, please refer to the Master Directions on Reporting (/en/web/rbi/-/notifications/master-direction-reporting-under-foreign-exchange-management-act-1999-updated-as-on-may-12-2023-lt-span-gt-10202). The registration is required to be done once the AD bank’s approval for the establishment of office is issued.

Q.10. Whether an LO can be upgraded under automatic route to BO under AD approval if overseas entity is eligible to open the BO under general permission? +

Ans. Yes, under advice to Reserve Bank, FED, CO Cell, Sansad Marg, New Delhi 110 001.