LIAISON OFFICE IN INDIA: FAQs

1. What is a Liaison Office?

The Companies Act, 2013 allows foreign companies to set up liaison offices in India [also known as representative office] These liaison offices can undertake only certain permitted  activities such as, i.e. acting as a channel of communication with  the Head Office and parties in India.

2. I am a Foreign Company. Can is set up a Liaison Office in India?

To set up a liaison office, a foreign company should have a profitable track record during the preceding three years in the home country and a net worth of at least USD 50,000/- as per the latest audited Balance Sheet. After setting up, the Liaison Office Acts as an extension of the Foreign Company’s head office, and it does not have any separate legal standing of its own.

3. Do I need to appoint a Resident to operate the activities of the Liaison Office?

The Liaison Office is managed by an Authorized Representative of the foreign company who should be a resident of India (Country Manager).

4. What are the activities Liaison Offices can undertake?

A liaison office is allowed to: –

• Represent its foreign parent company / group companies in India
• Promote export / import from / to India.
• Promoting technical/ financial collaborations between parent / group companies and companies in India.
• Acting as a communication channel between the parent company and Indian companies.

5. How do I set-up a Liaison Office? 

• A Foreign Company needs to take the approval of the Reserve Bank of India for setting up a liaison office by submitting an application in Form FNC to an authorized Dealer Category-1 Bank.
• Where the applicant company is registered in Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau and the application is for opening a liaison office in Jammu and Kashmir, North East region and Andaman and Nicobar Islands, or when the principal business of the applicant falls in the four sectors namely Defences, Telecom, Private Security and Information and Broadcasting, then the Application shall have to made to the Reserve Bank of India.
• Furthermore, applicants from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong, Kong, Macau, and Pakistan have to register with the state police authorities and copy of the approval letter for persons from these countries shall be marked by Authorized dealer bank to the Ministry of Home Affairs, Internal Security Division – I, Government of India, New Delhi for necessary action and record.

6. What are the activities I cannot undertake as a Liaison Office?

• Any activity of a trading, commercial or industrial nature. They cannot enter into any business contracts in its own name without the RBI’s prior permission.
• No commission/fees shall be charged, or any other remuneration received / income earned for the liaison activities/services rendered by it or otherwise in India.
• Its entire expense shall be met exclusively out of the funds received from head office through normal banking channels.
• It shall not borrow or lend any money from/to any person in India without RBI’s prior permission.

7. Is there a validity for the Liaison Office?

The permission to set up a liaison office is initially granted for a period of 3 years and this may be extended from time to time by any “AD Category 1 Bank”

8. Are there any other Registrations that may be required for a Liaison Office?

The Liaison Office may also need to avail the following registrations/approvals in India:

• PAN/TAN
• Professional Tax
• Shops and Commercial Establishment Registration
• Registration with Ministry of Corporate Affairs, by filing Form FC-1
• Import Export Code Registration

9. What is the liability of the of parent company/Head office in case of a Liaison Office?

The liability of the Foreign Company which is the Head Office of the Liaison office, is unlimited for all acts and omission of the Liaison Office.

10. What is the rate of Tax payable for Liaison Offices?

Since there is no income accrual, there is no income tax, however the liaison office still needs to file information in Form 49C with the Income Tax Department

11. What are the various Statutory Audits that my Books of Accounts must be undertaken by the Liaison Office?

• Statutory Audit Financials Statements are required to be audited by a Chartered Accountant
• Internal Audit: Not Applicable
• Tax Audit: Not Applicable

12. Are there any periodic compliance requirements?

• Filing
  • Audited accounts of the Liaison Office and World Accounts with the Registrar of Companies
  • Annual Activity Certificate along with audited financial statements with AD Category 1 Bank
  • Filing Quarterly TDS returns
  • Audited accounts to be with the Directorate of Income Tax, New Delhi
  • Filing of Form 49 C with Income Tax Department
  • Filing of Annual return with Registrar of Companies (ROC)

13. Can I relocate the Liaison Office after setting it up?

For shifting the Liaison Office to another place within the same city, the prior approval of the AD Category – I bank is required and in the event of shifting the Office to any other city in India, prior approval of the Reserve Bank is necessary.