A Comprehensive Guide to Establishing a Branch Office in India

Introduction: India's thriving economy and vast consumer market have made it a sought-after destination for global companies looking to expand their business operations. Setting up a branch office in India is a strategic choice for foreign companies wanting to explore the Indian market while maintaining their identity as a separate legal entity. In this guide, we'll take you through the step-by-step process of establishing a branch office in India and highlight the key requirements and documents needed.

What is a Branch Office? A branch office in India is an extension of a foreign company's operations within the country. It allows foreign companies to conduct commercial activities in India while adhering to the regulations set by the Reserve Bank of India (RBI) and the Ministry of Corporate Affairs (MCA). Unlike liaison offices, branch offices are permitted to engage in commercial operations, albeit with limitations tied to the parent company's activities.

Eligibility for Opening a Branch Office: To be eligible to open a branch office in India, foreign entities must meet specific financial criteria, including a track record of profit for the past five financial years in their home country and a net worth of at least USD 100,000. Exceptions can be made for subsidiaries of other companies, provided they have a Letter of Comfort from their parent company that meets the prescribed criteria for net worth and profit.

Step-by-Step Process to Set Up a Branch Office in India:

• Submitting Application to RBI via Authorized Dealer (AD) Bank:

1. Initiate the process by applying to the Reserve Bank of India (RBI) through an Authorized Dealer (AD) bank.
2. Provide essential documents, including a board resolution from the parent company, the parent company's certificate of incorporation, and details of the planned activities.

• Verification of KYC from the Banker of the Parent Company:

1. Furnish Know Your Customer (KYC) information from the parent company's banking institution.
2. The AD Bank reviews these documents to assess the financial stability of the parent company.

• Prior Approval from RBI in Exceptional Circumstances:

1. If the proposed activities don't align with RBI's automated procedure, prior approval from RBI may be necessary.
2. Provide a detailed justification for the request, and RBI will make a decision based on merit.

• Registering the Branch Office with the Registrar of Companies (ROC):

1. After RBI approval, register the branch office with the Registrar of Companies (ROC) in the specific state where it will be located.
2. Submit the required documents and pay the applicable fees, including the RBI permission letter, the parent company's certificate of incorporation, and the company's articles of association and memorandum.

• PAN Card, Tax Deduction Number, and Opening a Bank Account:

1. Apply for a Permanent Account Number (PAN) from the Income Tax Department to facilitate financial transactions and tax compliance.
2. Obtain a Tax Deduction Number (TAN) for tax deduction at source.
3. Open a bank account in India to manage financial operations.

• GST and Import Export Code Registration:

1. Register for the Goods and Services Tax (GST) if the branch office is involved in selling goods or providing services.
2. Obtain an Import Export (IE) code from the Directorate General of Foreign Trade (DGFT) if the branch office plans to import or export goods.

Documents Required for Setting Up a Branch Office in India:

• Official approval from the company's board
• Certified incorporation proof of the parent company
• Accompanying letter explaining the purpose of the branch office
• A formal application submitted to the RBI
• Memorandum of Association (MOA) and Articles of Association (AOA)
• Details of the company's history, nature of business, and key stakeholders
• Names and details of the company's directors and shareholders
• Director's declaration confirming compliance with legal requirements

Conclusion: Establishing a branch office in India offers foreign companies an opportunity to tap into the country's growth potential. While the process may seem complex, following the steps and meeting the requirements ensures a smooth setup, allowing you to explore the Indian market while maintaining your global identity.