Permitted Activities of Liaison Office in India:
- Establish healthy communication between the foreign parent company and the parties in India with a motive to create market opportunities.
- Promotion of import/export business relationship between countries.
- Form a financial and technical collaboration between domestic and overseas companies.
Points to consider before registering Liaison office:
Net Worth Requirement
A parent company must have a beneficial track record of the past three years in a row, and they should own a net worth of more than $50,000 attested by their auditors.
Income Generating Activity
The parent company provides financial aid to all the operations of the liaison office since the liaison office is not allowed to earn any income in India.
Name & New Additional Liaison Office
The name must be similar to that of the foreign parent company. In addition, a new approval is needed for each new liaison office from the Reserve Bank of India with complete justification.
Taxation in India
Income tax authorities have the right to impose income tax on a liaison office.
List of Documents for Liaison Office Registration:
Documents required from Parent Company
- Certificate of Incorporation/Registration of Foreign Company
- Memorandum of Association
- Article of Association
- Complete details of Directors
- Complete details of shareholders of the applicant company
- Net worth certificate attested by Certified Public Accountant (CPA)
- Audited financial statement of the last three years
- Applicant’s banker’s report
Liaison Office Registration Process in India:
- Application for DSC
- Filing of Application with RBI
- KYC document verification from bank
- RBI Approval for Office registration in India
- Registration of Liaison Office with the Registrar of Companies
- Opening of Bank Account
- GST registration
Validity period 3 years. Liaison office has to renew its permission after 3 years.
Exception to the above: Construction Development & NBFC has to renew its permission after Two Years
Closure of Liaison Office:
At the time of winding up of Liaison offices the company has to approach the designated AD Category – I bank with the following documents:
- Copy of the Reserve Bank’s permission/ approval from the sectoral regulator(s) for establishing the LO.
- Auditor’s certificate – i) indicating the manner in which the remittable amount has been arrived at and supported by a statement of assets and liabilities of the applicant, and indicating the manner of disposal of assets.
- No-objection / Tax Clearance Certificate from Income-Tax authority for the remittances.
- Confirmation from the applicant/parent company that no legal proceedings in any Court in India are pending and there is no legal impediment to the remittance.
- A report from the Registrar of Companies regarding compliance with the provisions of the Companies Act, 1956 or 2013 , in case of winding up of the Office in India.
- A report from the Registrar of Companies regarding compliance with the provisions of the Companies Act, 1956, in case of winding up of the Office in India.