A branch office is an appropriate business strategy for international businesses wishing to create a temporary presence in India. The branch office functions as an outpost of the head office’s operations and engages in similar business and activities.
The majority of organizations utilize this method to research the Indian market without having to devote long-term resources. As a result, companies intending to grow in Asia or diversify their presence there should think about whether a branch office satisfies their market entrance requirements.
The Company Must Meet The Following Criteria To Open A Branch Office In India:
- The foreign parent company’s net worth should exceed $1,000,000
- The business must have a five-year track record of profitability.
- The business is involved in the Prescribed Activities of the Branch Office in India indicated above.
Prescribed Activities of India’s Branch Office
- It can handle products import and export.
- Offer expert and consulting services
- Should engage in research in any area where the parent firm is already heavily committed.
- Increasing technical/financial cooperation on the parent company’s behalf
- Working in India as a parent company representative and acting as a buying/selling agent
- Building software and providing IT services in India
- Participating in the provision of technical assistance for the items that the parent firm supplies
- To perform authorized representative work in India for a foreign shipping or airline firm.
Considerations for Opening a Branch Office in India
The Branch Office’s name must resemble that of the parent company. The following is a list of additional important information to bear in mind before submitting a branch office registration application:
Need for Net Worth: A foreign parent business must have a successful track record for the previous five fiscal years and a net worth properly disclosed in the financial statement that exceeds $100,000.
Allowable Profit Remittance: Once all taxes have been paid and an audit of all the books of accounts has been completed, the amount of profit made by the branch office can be transferred from India to the parent business.
Branch office’s name: A parent company’s name must be used by a branch office.
Income tax in India: 40% income tax and surcharges are applied to the profits of the Indian branch office of the overseas parent firm. The supply of goods and services is subject to the GST.
Time frames for registering: Three to four weeks is the projected timeframe. But it may differ from instance to situation.
Annual reporting: The branch office is anticipated to comply with the Ministry of Corporate Affairs, ROC, and Income tax agency filing standards.
List of Documents Needed to Register a Branch Office
The procedure of registering a branch office depends heavily on precise and correct documents. Documents must therefore be current and valid.
- Required Parent Company Documents
- Declaration of Incorporation
- Articles of Association Memorandum of Association
- Complete information about the company’s directors and key executives.
- Complete information on the applicants’ company’s shareholders
- Certified Public Accountant attested net worth certificate (CPA)
- Financial statements that have been audited for the last five years
- An evaluation by the applicant’s bank in the destination nation
Process of registering a branch office in India
Process for Registering a Branch Office in India
Application Submission to RBI the FNC receives applications from international companies through the AD Bank Branch office. AD Bank submits the application to the Reserve Bank of India (Authorized Dealer Category 1 prescribed by RBI). Since they are the conduit for all communication with the RBI, the AD bank plays a crucial function.
Prior RBI Approval in Certain Cases
In the specific circumstances listed by the RBI, the AD bank requires advance clearance. The automatic route is available to firms whose primary business activity is in an area where 100% FDI is permitted.
The circumstances in which the bank needs to grant prior consent
1. The application is for the opening of a BO/LO/PO in the North East area, Jammu and Kashmir, and Andaman and Nicobar Islands, and the applicant company is registered/incorporated, or an applicant is a citizen of Pakistan, Afghanistan, Iran, China, Bangladesh, Sri Lanka, Hong Kong, or Macau;
2. The four industries of telecom, private security, defense, and information and broadcasting comprise the bulk of business activity.
3. The candidate is an NGO.
Verification of KYC by the Parent Company’s Bank: The overseas company’s banker receives a request to review the paperwork. Swift-based verification is another name for the procedure of sending a request for verification. The application is preceded for approval once the foreign banker has verified the paperwork. Depending on the situation, the RBI/AD may additionally request the other papers.
RBI Approval for the Registration of a Branch Office in India: The AD Banker itself adheres to a specific policy while approving the branch office in India. Cases, where the automatic route is unavailable, are given priority.
Branch Office Registration with the ROC
Within 30 days of receiving RBI approval to open a branch office in India, a form FC-1 application for the foreign company’s branch office registration is submitted. For e-filing statutory papers with the ROC, the authorized signatory must have a digital signature in addition to their DIN if they are an Indian director on the board.
The opening of a bank account, a PAN card, and a tax deduction number: An exclusive 10-digit number, known as a PAN number, is issued by the Indian income tax department. The branch office is able to open a bank account after it has a PAN number. Every taxpayer must also get a Tax Deduction Account Number in order to comply with all TDS regulations.
IEC & GST Registration: A copy of the check is required to register for GST registration and an import-export code after a bank account and chequebook are obtained.
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