the Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016.

Official text

RESERVE BANK OF INDIA

FOREIGN EXCHANGE DEPARTMENT

CENTRAL OFFICE

MUMBAI 400001

Notification No. FEMA 22(R) /RB-2016 March 31, 2016

Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office

or any other place of business) Regulations, 2016

In exercise of the powers conferred by sub-section (6) of Section 6 of the Foreign Exchange Management Act, 1999 (42

of 1999), and in supersession of Notification No. FEMA 22/2000-RB dated May 3, 2000, as amended from time to

time, the Reserve Bank of India makes the following regulations to prohibit, restrict and regulate establishment in India

of a branch office or a liaison office or a project office or any other place of business by a person resident outside

India:-

1. Short title and commencement

a. These Regulations may be called the Foreign Exchange Management (Establishment in India of a branch

office or a liaison office or a project office or any other place of business) Regulations, 2016.

b. They shall come into force from the date of their publication in the Official Gazette.

2. Definitions

In these regulations, unless the context otherwise requires –

a. 'Act' means the Foreign Exchange Management Act, 1999 (42 of 1999).

b. ‘Authorised Dealer’ means a person authorised as an authorised dealer under sub-section (1) of section 10 of

the Act.

c. 'Foreign company' means a body corporate incorporated outside India and includes a firm or other association

of individuals.

d. 'Branch Office' in relation to a company, means any establishment described as such by the company.

e. 'Liaison Office' means a place of business to act as a channel of communication between the principal place of

business or Head Office or by whatever name called and entities in India but which does not undertake any

commercial /trading/ industrial activity, directly or indirectly, and maintains itself out of inward remittances

received from abroad through normal banking channel.

f. 'Project Office' means a place of business in India to represent the interests of the foreign company executing a

project in India but excludes a Liaison Office.

g. 'Site Office' means a sub-office of the Project Office established at the site of a project but does not include a

Liaison Office.

h. ‘Stand-alone basis’ means such branch offices would be isolated and restricted to the Special Economic Zone

alone and no business activity/ transaction will be allowed outside the Special Economic Zones in India which

includes branches/subsidiaries of its parent office in India.

i. The words and expressions used but not defined in these Regulations, shall have the same meanings

respectively assigned to them in the Act.

https://rbi.org.in/Scripts/NotificationUser.aspx?Id=176&Mode=0

3. Prohibition against opening a branch office or a liaison office or a project office or any other place of

business in India

No person resident outside India shall without prior approval of the Reserve Bank open in India a branch office or a

liaison office or a project office or any other place of business by whatever name called except as laid down in

these Regulations.

Provided that

a. A banking company resident outside India shall not require any approval under these Regulations for

establishing any office in India if such company has obtained necessary approval under the provisions of the

Banking Regulation Act, 1949.

b. An insurance company resident outside India shall not require any approval under these Regulations for

establishing any office in India if such company has obtained approval from the Insurance Regulatory and

Development Authority established under section 3 of the Insurance Regulatory and Development Authority

Act, 1999.

c. A company resident outside India shall not require any approval under these Regulations to establish a branch

office in the Special Economic Zones (SEZs) to undertake manufacturing and service activities, subject to the

conditions that:

i) such branch offices are functioning in those sectors where 100% FDI is permitted;

ii) such branch offices comply with Chapter XXII of the Companies Act, 2013; and

iii) such branch offices function on a stand-alone basis.

4. Approval for opening a branch office or a liaison office or a project office or any other place of business in

India

a. Eligibility

A person resident outside India can establish a branch office or a liaison office in India provided it meets the

following criterion:

i. For Branch Office — a profit making track record during the immediately preceding five

financial years in the home country and net worth of not less than USD 100,000 or its

equivalent.

ii. For Liaison Office — a profit making track record during the immediately preceding three

financial years in the home country and net worth of not less than USD 50,000 or its

equivalent.

Provided that a person resident outside India that is not financially sound and are subsidiaries of other

companies may submit a Letter of Comfort (Annex A) from their parent company subject to the condition that

the parent company satisfies the prescribed criterion for net worth and profit.

b. Permissible activities

A person resident outside India permitted by the Reserve Bank under these Regulations to establish a branch

or liaison office in India may undertake or carry on any activity specified in Schedule I or II (Annex B), as the

case may be, but shall not undertake or carry on any other activity unless otherwise specifically permitted by

the Reserve Bank.

c. Application form

A person resident outside India desiring to establish a branch office or a liaison office or a project office or

any other place of business in India shall submit an application in Form FNC (Annex C) to an Authorised

Dealer Category-I bank who may, subject to the provisions of Regulation 5, grant approval as per the

directions and/or guidelines issued by the Reserve Bank in this regard. In case no office is opened by the

person resident outside India within six months from the date of approval letter, the approval for establishing

the office in India shall be cancelled. In cases where the person resident outside India is not able to open the

office within the stipulated time frame due to reasons beyond their control, the Authorised Dealer Category-I

bank may consider granting extension of time for setting up the office by a further period of six months. Any

further extension of time shall require the prior approval of the Reserve Bank in this regard.

d. Extension of the validity period for liaison office

I. A person resident outside India may establish in India under these Regulations a liaison office for a period

of three years subject to the provisions of Regulation 4 d (III). The non-resident entity may apply to the

Authorised Dealer Category-I bank concerned for extension of the validity period of approval, and upon

receipt of such an application, the Authorised Dealer Category-I bank concerned may extend the validity

period of approval for a period of three years from the date of expiry of the original approval / extension

granted, subject to such directions issued by the Reserve Bank in this regard.

II. The application for extension of the validity period of the liaison office of banks and entities engaged in

insurance business has to be directly submitted to the Department of Banking Regulation (DBR), Reserve

Bank and the Insurance Regulatory and Development Authority (IRDA) respectively.

III. Entities engaged in construction and development sectors and which are Non-Banking Finance Companies

are permitted to open a Liaison Office for two years only. No further extension would be considered for

liaison offices of entities which are Non-Banking Finance Companies and those engaged in construction

and development sectors (excluding infrastructure development companies). Upon expiry of the validity

period, the offices shall have to either close down or be converted into a Joint Venture / Wholly Owned

Subsidiary in conformity with the extant Foreign Direct Investment policy.

e. Additional offices

A person resident outside India desiring to establish additional branch office or liaison office may submit to

the Authorised Dealer Category-I bank a fresh FNC Form along with the justification for the need for

additional office/s.

f. Project office

I. A foreign company may open project office/s in India provided it has secured from an Indian company, a

contract to execute a project in India, and

i. the project is funded directly by inward remittance from abroad; or

ii. the project is funded by a bilateral or multilateral International Financing Agency; or

iii. the project has been cleared by an appropriate authority; or

iv. a company or entity in India awarding the contract has been granted term loan by a Public

Financial Institution or a bank in India for the Project.

Explanation:

For the purpose of this Regulation,

i. 'a bilateral or multilateral International Financing Agency' means the World Bank or the

International Monetary Fund or similar other body.

ii. “Public Financial Institution” is a public financial institution as defined in Section 4A of the

Companies Act, 1956.

II. A person from any country other than Pakistan who has been awarded a contract for a project by a

Government authority/ Public Sector Undertaking may open a bank account with an Authorised Dealer

Category-I bank without any prior approval from the Reserve Bank.

g. Registration with State Police Authorities

A person from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau opening a branch

office or a liaison office or a project office or any other place of business in India shall have to register with

the concerned State Police Authorities. Copy of approval letter for ‘persons’ from these countries shall be

marked by the AD Category-I bank to the Ministry of Home Affairs, Internal Security Division-I,

Government of India, New Delhi.

h. Fund/non-fund based facilities

Authorised Dealer Category-I bank may extend fund and/or non-fund based facilities to branch office and

project offices based on the guidelines issued by the Reserve Bank in this regard.

i. Remittance of profit or surplus

I. Branch office may remit outside India profit of the branch net of applicable Indian taxes, on

production of the following documents to the satisfaction of the Authorised Dealer Category-I bank

through whom the remittance is effected:

i. A certified copy of the audited Balance Sheet and Profit and Loss account for the relevant year.

ii. A Chartered Accountant’s certificate certifying

1. the manner of arriving at the remittable profit;

2. that the entire remittable profit has been earned by undertaking the permitted activities

and

3. that the profit does not include any profit on revaluation of the assets of the branch.

II. Authorised Dealer Category – I bank may permit intermittent remittances by project offices pending

winding up / completion of the project subject to submission of the following:

i. certified copy of the final audited project accounts;

ii. the statutory auditor’s certificate showing the manner of arriving at the remittable surplus and

confirming that sufficient provisions have been made to meet the liabilities in India including

Income Tax, etc.; and

iii. An undertaking from the project office that the remittance will not, in any way, affect the

completion of the project in India and that any shortfall of funds for meeting any liability in

India will be met by inward remittance from abroad.

j. Acquisition of property

Acquisition of property by branch office/project office shall be governed by the guidelines issued under

Foreign Exchange Management (Acquisition and transfer of immovable property outside India) Regulations.

k. Transfer of assets

A person resident outside India permitted under these Regulations to establish a branch office or liaison office

or project office may apply to the concerned Authorised Dealer Category-I bank for transfer of its assets to a

Joint Venture/Wholly Owned Subsidiary or any other entity in India. Authorised Dealer Category-I bank shall

be guided by the instructions laid down by Reserve Bank in this regard.

l. Annual Activity Certificate (AAC)

The branch office/liaison office may submit the Annual Activity Certificate (Annex D) as at the end of March

31 along with the audited financial statements including receipt and payment account on or before September

30 of that year. In case the annual accounts of the office are finalized with reference to a date other than

March 31, the AAC along with the audited financial statements may be submitted within six months from the

due date of the Balance Sheets to the Authorised Dealer Category-bank and the Director General of Income

Tax (International Taxation), Drum Shape Building, I.P. Estate, New Delhi 110002.

AAC from a Chartered Accountant showing the project status and certifying that the accounts of the project

office have been audited and the activities undertaken are in conformity with the general/ specific permission

given by the Reserve Bank may be submitted by the project office to the designated Authorised Dealer

Category-I bank.

m. Closure of office and remittance of winding up proceeds

I. Requests for closure of the branch office/liaison office may be submitted to the Authorised Dealer

Category - I bank along with the following documents:

i. Copy of the Reserve Bank's/Authorised Dealer Category-I bank’s approval for establishing the

office.

ii. Auditor's certificate :

1. 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;

2. confirming that all liabilities in India including arrears of gratuity and other benefits to

employees, etc. of the office have been either fully met or adequately provided for;

3. confirming that no income accruing from sources outside India (including proceeds of

exports) has remained unrepatriated to India.

iii. Confirmation from the applicant/parent company that no legal proceedings in any Court in

India are pending against the office and there is no legal impediment to the remittance.

iv. A report from the Registrar of Companies regarding compliance with the provisions of the

Companies Act, 2013, in case of winding up of the branch office/liaison in India.

v. Any other document/s, specified by the Reserve Bank/Authorised Dealer Category-I bank

while granting approval.

II. Remittance of winding up proceeds of branch or liaison office established in India shall be governed

by the guidelines issued under Foreign Exchange Management (Remittance of assets) Regulations.

5. Approval of the Reserve Bank in certain cases for establishment of branch office, liaison office or project

office or any other place of business in India

Any application from a person resident outside for opening of a branch office or a liaison office or a project office

or any other place of business in India shall require prior approval of Reserve Bank in the following cases where

a. the applicant is a citizen of or is registered/incorporated in Pakistan;

b. the applicant is a citizen of or is registered/incorporated in Bangladesh, Sri Lanka, Afghanistan, Iran, China,

Hong Kong or Macau and the application is for opening a liaison, branch or project office in Jammu and

Kashmir, North East region and Andaman and Nicobar Islands;

c. the principal business of the applicant falls in the four sectors namely Defence, Telecom, Private Security and

Information and Broadcasting:

Provided that in the case of proposal for opening a project office relating to defence sector, no

separate reference or approval of Government of India shall be required if the said non-resident

applicant has been awarded a contract by/ entered into an agreement with the Ministry of Defence or

Service Headquarters or Defence Public Sector Undertakings.

d. The applicant is a Non-Government Organisation, Non-Profit Organisation, Body/ Agency/ Department of a

foreign government.

Such applications shall be forwarded to the Reserve Bank, Foreign Exchange Department, Central Office Cell, New

Delhi by the Authorised Dealer Category-I bank and be considered in consultation with the Government of India.

(Indira Nanu)

Chief General Manager

Annex A

Format of the Letter of Comfort

[See Regulation 4 (a)]

The Authorised Signatory,

(Address of the Authorised Dealer Category-I bank)

Dear Sir,

Sub: Application for establishment of branch / liaison office in India by our subsidiary / group company,

M/s_________________________

You may kindly refer to the application made by our subsidiary / group company,

M/s_____________________________to your office for establishing branch / liaison office in India.

2. In this connection, we, ______________________(the parent company/group company) undertake to provide the

necessary financial support for our subsidiary / group company's operations as a branch / liaison office in India. Any

liability that may arise due to the functioning of the branch/liaison office in India will be met by us (the parent

company/group company), in case of inability on part of the branch/liaison office to do so.

3. We are also enclosing the financial background of our company in the form of our latest Audited Balance Sheet /

Account Statement certified by a Certified Public Accountant.

Yours faithfully,

( )

Authorised Representative of the parent company

Annex B

Schedule I

[See Regulation 4 (b)]

Permitted activities for a branch office in India of a person resident outside India

i. Export/import of goods.

ii. Rendering professional or consultancy services.

iii. Carrying out research work in which the parent company is engaged.

iv. Promoting technical or financial collaborations between Indian companies and parent or overseas

group company.

v. Representing the parent company in India and acting as buying/ selling agent in India.

vi. Rendering services in Information Technology and development of software in India.

vii. Rendering technical support to the products supplied by parent/group companies.

viii. Representing a foreign airline/shipping company.

Schedule II

[See Regulation 4 (b)]

Permitted activities for a liaison office in India of a person resident outside India

i. Representing the parent company / group companies in India.

ii. Promoting export / import from / to India.

iii. Promoting technical/ financial collaborations between parent / group companies and companies

in India.

iv. Acting as a communication channel between the parent company and Indian companies.

Annex C

Form FNC

[See Regulation 4 (c)]

[This application form shall be completed and submitted to the AD Category-I bank designated by the applicant along

with the documents mentioned in item (viii) of the Declaration.]

Part I

No. Details Particulars

1. i. Full name and address of the applicant

ii. Date and Place of incorporation / registration

iii. Telephone Number(s)

iv. Fax Number(s)

v. E-mail ID

2. i. Details of capital

ii. Paid-up capital

iii. Free Reserves/Retained earnings as per last audited Balance

Sheet/Financial Statement

iv. Intangible assets, if any

3. Brief description of the activities of the applicant

4. i. Value of goods imported from and / or exported to India by the

applicant during each of the last three years:

a. Imports from India

b. Exports to India

ii. Particulars of existing arrangements if any, for representing the

company in India.

iii. Particulars of the proposed liaison/ branch office:

a. Details of the activities/ services proposed to be

undertaken/ rendered by the office

b. Place where the office will be located

c. Phone number

d. E-mail ID

e. Expected number of employees

(with number of foreigners)

5. i. Name and address of the banker of the applicant in the home

country

ii. Telephone & Fax Number

iii. E-mail ID

6. For Non-profit / Non-Government Organisations:

i. Details of activities carried out in the host country and other

countries by the applicant organisation

ii. Expected level of funding for operations in India

iii. Copies of the bye-laws, Articles of Association of the

organization

7. For project offices:

i. Reference no. and date of letter awarding the contract

ii. Particulars of authority awarding the project/contract

iii. Total amount of contract

iv. Address/e-mail/telephone number/fax number of the project

office

v. Tenure of project office

vi. Nature of project undertaken

8. Any other information which the applicant company wishes to furnish

in support of this application.

Part II- Additional information to be submitted by applicants where Reserve Bank’s approval is necessary under

Regulation 5 of Notification No. FEMA 22 (R)/2016-RB dated March 31, 2016

I. Details in respect of Company/ Firm

Sr.

No.

Full name of

the company

Date of

registration of

the company

Address of Head

Office, Regional

Office and

Registered Office

Previous

name of the

company if

any

Details of earlier

approvals or

rejections, if any,

(ref. no. and date)

Enclosed

application for

branch

office/liaison

office/project

office prescribed

by DEA

II. Details in respect of Directors/Key Executives

Sr.

No.

Full name of

Board of

Directors and

Key

Executives

(wherever

applicable)

Present

position

held with

date (since

when)

Date of

Birth

Parentage

Present and

permanent

address

Nationality

Passport

Nos. and

issue date

Contact

address

and

telephone

number

III. Details of shareholders of applicant company (all firms/companies/entities/individuals having

shareholding more than 10 % )

Sr.

No.

Full name Parentage

Father/

Mother

Date of

birth

Permanent

address

Present

address

Present

position

held

Nationality (if

holding dual

nationality, both

must be clearly

mentioned)

% of shares

held in the

company

IV. Details of criminal cases, if any, against the company / Director (s) for which security clearance is

sought

a. Name, address and registration number of the company :

b. Name and address of owners, promoters and directors of the company :

1. _______________________________________

2. _______________________________________

3. _______________________________________

4. _______________________________________

c. Are the company owners, promoters or directors listed above, the subject of any

1. Preventive detention proceedings : Yes/No

2. Criminal proceedings : Yes/No

d. If, Yes, please provide the following details

1. Detention/case/FIR/warrant number:

2. Police station/District/Agency :

3. Section of law :

4. Name and place of the court :

e. The above mentioned details are in respect of both India and any foreign country.

DECLARATION

We hereby declare that:

i. The particulars given above are true and correct to the best of our knowledge and belief.

ii. Our activities in India would be confined to the activities indicated in column 4(iii) (a)/7 (vi) above.

iii. If we shift the office to another place within the city, we shall intimate the designated AD Category - I bank. In the

event of shifting the office to any other city in India, prior approval of the AD Category-I bank will be obtained.

iv. We will abide by the terms and conditions that may be stipulated by the Government of India / Reserve Bank /

designated AD Category - I bank from time to time.

v. We, hereby commit that we are agreeable to a report / opinion sought from our bankers abroad by the Government

of India /Reserve Bank.

vi. We understand that the approval, if granted, is from FEMA angle only. Any other approvals / clearances, statutory

or otherwise, required from any other Government Authority/ Department/ Ministry will be obtained before

commencement of operations in India.

vii. We have no objection to the Reserve Bank placing the details of approval in public domain.

viii. We enclose the following documents:

a. Copy of the Certificate of Incorporation / Registration; Memorandum of Association and Articles of

Association attested by the Notary Public in the country of registration.

[If the original Certificate is in a language other than in English, the same may be translated into English and notarized

as above and cross verified/attested by the Indian Embassy/ Consulate in the home country].

b. Audited Balance sheet of the applicant company for the last three/ five years in case of branch

office/liaison office respectively.

[If the applicants’ home country laws/regulations do not insist on auditing of accounts, an Account Statement certified

by a Certified Public Accountant (CPA) or any Registered Accounts Practitioner by any name, clearly showing the net

worth may be submitted]

c. Bankers' Report from the applicant’s banker in the host country / country of registration showing the

number of years the applicant has had banking relations with that bank.

d. Power of Attorney in favour of signatory of Form FNC in case the Head of the overseas entity is not

signing the Form FNC.

(Signature of Authorised Official

of the Applicant Company)

Name:

Designation:

Place:

Date:

Annex D

Annual Activity Certificate

(See Regulation 4(l)]

To whomsoever it may concern

This is to certify and confirm that during the period from __________________ to ________________, the branch

office/liaison office/ project office/s with PAN No. ---------------------- (wherever applicable) of

M/s__________________ , UIN-_______________ (wherever applicable) has/ have undertaken only those activities

that have been specifically permitted by the Reserve Bank/ Authorised Dealer Category-I bank vide its approval letter/s

No/s. ______________________________dated ______________and has/have complied with the terms and conditions

specified in the above mentioned letter/s. If there is any change in address and other contact details, the same has been

brought to the notice of the Authorised Dealer Category-I bank.

For Project Office only

2. Project status: ________________________________________________________________________________

_______________________________________________________________________________________________

3. This is to certify that during the period from _______________ to ______________, no inter-project funds transfer

has been carried out without prior approval of the Reserve Bank.

_____________________________

(Signature of the Statutory Auditor/s)

(Name of the Chartered Accountant)

ICAI Membership No.:

Address:

Place:

Date:

Published in the Official Gazette of

Government of India – Extraordinary –

Part-II, Section 3, Sub-Section (i) dated

31.03.2016- G.S.R.No.384(E)