Doing Business in India - RSM Austria

* Net worth includes total of paid-up capital and free reserves, less intangible assets
as per the latest Audited Balance Sheet or Account Statement certified by a
Certified Public Accountant or any Registered Accounts Practitioner by whatever
name.
Application for grant of approval is to be made with the Authorized Dealer Category
I bank (AD) which would then forward it to the RBI along with suggestions and the
requisite documents. RBI may grant approval for setting up a liaison office on
receipt of such an application. Some of the criterions which shall be considered by
the RBI before granting approval include profit making track record of the foreign
company in the home country and its net worth.
Foreign companies are permitted to establish an office or to post a representative in
India for carrying on liaison activities, subject to the following conditions:
i. Commission or fee is charged or any other remuneration received by the
Indian office of the foreign company for its liaison activities in India.
ii. Except for the liaison work, the office does not undertake any activity of a
trading, commercial or industrial nature without the prior permission of
the Reserve Bank of India.
iii. All expenses of the Indian office are met exclusively by remittances from
abroad through normal banking channels.
iv. No borrowing or lending of any money from / to any person in India
without the prior permission of RBI.
v. The Indian office submits an annual statement to the AD and a copy to the
Directorate General of Income Tax (International Taxation), New Delhi,
giving details of remittances received from abroad, supported by bank
certificates, together with a copy of the final accounts of the Indian office
certified by a Chartered Accountant.
Liaison offices are permitted to carry out the following activities in India:
i. To represent the parent company / group companies in India.
ii. To promote export / import from / to India.
iii. To promote technical / financial collaborations between parent / group
companies and companies in India.
iv. To act as a communication channel between the parent company and
Indian companies.
Foreign companies having only liaison offices and not engaged in any trading,
manufacturing or other commercial activity in India, have to furnish certain
mandatory information to the Registrar of Companies in India.
1.5 Project Office
Foreign companies planning to execute specific projects in India can set up
temporary project /site offices in India for such purpose. The standard conditions
imposed for operating such offices are:
The foreign company has secured from an Indian company a contract to
execute a project in India.
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