|Export Promotion||SEZ units operational before 1st April 2020||Deduction of 100% of profits and gains derived from export business for first 5 years of commencement, 50% of profits and gains derived from export business for next 5 years, 50% of ploughed-back profits and gains from export business for next 5 years.|
|Research & Development||Companies in respect of any expenditure on R&D in an approved in-house facility||Weighted tax deduction of 200% granted to companies.||31st March 2020|
|Investment-linked||To incentivize investment in certain sectors, any capital expenditure incurred for specified businesses is allowed as a deduction in the year in which it is incurred.|
|Startup India Scheme||Tax incentives granted to eligible start-ups are the tax holiday for any consecutive 3 years (from initial 5 years) in respect to 100% of their profits, including fast-tracking of patent applications with 80% rebate.|
|International Financial Services Centre||Caters to customers outside the jurisdiction of the domestic economy. Such centers deal with flows of finance, financial products and services across borders.||Tax concessions on capital gains, Minimum Alternate Tax and Dividend Distribution Tax|
|S. No.||Information||Branch Office||Project Office|
|1||Definition||As per the foreign exchange management act, a branch office is an entity which is formed by a foreign parent company in India. As explained above, the meaning of branch office is also present under the definition of the Companies Act 2013. All types of Activities can be carried out by the branch office.||The definition of a branch office and project office is not similar. While an entity that is formed by a foreign parent company, to complete a specific project is considered as a project office. Even under the companies’ act 2013, the definition of a project office is included under the foreign office.|
|2||Permission||Prior Permission of the RBI is required for setting up a branch office in India. If a foreign bank wants to establish a branch office in India, then specific approval would be required from the Department of Banking and Supervision of the RBI. Foreign Insurance companies that have to set up branches in India would have to obtain specific permission from the Insurance Regulatory and Development Authority of India (IRDAI).||Both branch offices and foreign offices require prior permission from the requisite authorities. Even a project office would require permission from the RBI to set up an office in India. Apart from this permission, a project office would require permission from other authorities such as regulatory agencies and international institutions. Regulatory approval is required under domestic law as well as foreign law.|
|3||Routes for Foreign Investment||For a branch office, foreign investment can either come through the automatic route or the approval route. The automatic route does not require any prior approval from the Government of India. However, the government route will require prior approval from the government of India. Foreign companies that want to establish branch offices and project offices would have to comply with the required investment criteria and norms related to foreign investment.||Like branch offices, even project offices would have to comply with the routes which are prescribed by the government of India. The automatic route does not require any prior approval from the government of India. However, the government route requires prior approval from the government of India. For example, if the foreign office is setting up a project office for the purposes of coal mining activity, then this would be allowed under the automatic route. Previously, this was covered under the government route.|
|4||Comply with Rules||Setting up a branch office and project offices requires the entity to comply with specific rules. Apart from the rules set by the RBI, the branch office would have to comply with the specific requirement of other authorities. For example, Branch Offices are allowed to operate from SEZ (Special Economic Zones). Hence they would have to comply with the requirements of the SEZ rules as well as the rules which are established by the Companies Act, 2013.||Branch offices and project offices which are set by a foreign parent company has to follow specific prescribed rules. However, project offices are allowed to operate on any premises if they are compliant with the relevant regulations.|
|5||Eligibility Criteria for Branch Office and Liaison Office||The eligibility criteria for a branch office and project office would be different, as the main activities which are carried out by these offices are not similar. To set up a branch office, the following criteria have to be satisfied: Eligible Activities have to be carried out by the branch office.RBI will grant a specific license for carrying out the activities of a branch office. Documents have to comply with the conditions which are required. All the required criteria have to be fulfilled for applying for a branch office.||The eligibility criteria would be different for a project office. The foreign parent company has to ensure the following is satisfied while making an application for the establishment of a project office:
A foreign company wanting to establish as a project office must ensure that the activities carried out by the project office will be for a specific project or a certain period of time. The Foreign parent company that is establishing a project office must receive remittance for carrying out the activities in India. The funding or remittance must be made by an international multilateral agency or a bilateral agency. There must be a specific agreement or a contract between the foreign parent company and the Indian Company planning to take part in the project office. An international institution such as the World Bank or the International Monetary Fund would be the appropriate institution that is funding the project. Specific clearances are required from domestic as well as international authorities. A loan must be required from a Public Financial Institution. This institution must take part in the contract.
|6||Procedure for Establishing a Branch Office and Project Office||The procedure for establishing a branch office and the project office would be similar. However, the period of time for seeking consent from the respective authorities may vary according to the guidelines. The following procedure has to be considered for setting up a branch office in India: An application has to be made to the Foreign Exchange Division, RBI. This application will not be made directly by the applicant to the RBI. The application will go through the authorized dealer or the authorized agency. The applicant has to fulfill the above criteria for applying for a branch office in India. If this is carried out, then the applicant has to make the application in Form- FNC. With the application, requisite documentation must be submitted to the authorized dealer.||Like establishing a branch office, the procedure for establishing a project office would be the same. However, as the activities which are carried out by the project office are different, they may be some difference in the procedure for establishment. A similar procedure is followed by the applicant to establish a project office. The applicant has to make an application to the foreign exchange division of the RBI. The application must be made in Form FNC. With the application, specific documents must be submitted by the applicant.|
|7||Documentation for Branch Office and Project Office||The documents required to be submitted for establishing a branch office and a project office would not be the same. The following documents are required for establishing a branch office in India: Company Incorporation Documents such as the Certificate of Incorporation, Memorandum of Association of the Company, Articles of Association of the Company, Audited Statements of the Company, Audited Balance Sheets of the company, Letter of Comfort if required- This would only be necessary if the branch office does not satisfy the eligibility criteria for establishing an office in India. In such an instance, the LOC or letter of comfort must be submitted through the foreign parent company.
All the above documents must be provided or translated in the English Language.
|Branch office and Project office have different documentation requirements. However, the documentation requirements for a project office would be more based on financial statements and loan agreements from the respective international agencies. However, the following documents have to be submitted to the authorized dealer:
Contract or Agreement between the Indian company and foreign parent company. Term Loan Agreement Other respective documents required for sanctioning the project.
|8||Other Reporting Requirements for Branch Office and Project Office||For setting up a branch office and project office in India, the applicant would also have to provide crucial information such as: Name and address of the registered foreign company, Cost of carrying out the activities by the company, Types of activities which will be carried out by the company.||Like the branch office, similar information has to be provided by the project office to the respective authorities. The following information is required to be provided: Address and name of the company, Tenure of project activities which are carried out by the company. Cost of the Project Activity.|
|9||Exempt from RBI –Branch Office and Project Office.||Branch Offices which are formed as Insurance companies and banking companies are exempted from seeking consent from the RBI to set up. Instead, they would require advice from the Department of Banking Supervision, RBI or the IRDAI as required.||Branch offices and project offices require compliance from respective authorities. However, a project office is not exempt from the RBI for securing a license to operate.|
|10||Permissible Activities – branch office and Project Office||There are different activities which are permitted for a branch office and project office. However, the activities which are permitted for a branch office will not be permitted for a project office. The following activities are carried out by a branch office.
Export and Import of goods and services- Any form of consultancy business, Any form of Research and Development Activities for the parent company, Development of Software and Technology Services for the Parent Company, Transportation Company can also start this form of business.
|The activities carried out by project office include: Carrying out different types of projects, Project can include manufacturing projects, Other form of turnkey and construction contracts.|
In order to curb such issues and to make entry and exit easy for the Foreign Company the Reserve Bank of India has granted general permission to foreign companies to establish Project Offices in India, Provided they have secured a contract from an Indian company to execute a project in India and
The foreign company who wants to execute e project in India and they will have a presence for limited period of time. Generally foreign companies engaged in turnkey construction or installation set up a project office in India. Foreign entities who have been rewarded a contract to execute a infrastructure or installation project in India, execute the project, through project offices duly registered with the Reserve Bank of India (RBI) and the Registrar of Companies (ROC). The difference between project office and liaison office is that project office can undertake commercial activities related to the project awarded whereas a liaison office cannot undertake any commercial activity Revised Regulations 2016 under FEMA has delegated all powers of approving applications to AD banks except few cases.
Registration with police authorities: However, Applicants from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau or Pakistan desirous of opening Project Office(s) in India shall have to register with the 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 for necessary action and record.
Important points to be noted
Project Offices can open non-interest bearing foreign currency accounts with AD Category – I banks subject to the following:
Foreign companies who have been reinforced a contract to set up a project office or to execute an infrastructure in India, execute the business activities or project, through project offices which are duly registered with the Registrar of Companies (ROC) and the Reserve Bank of India (RBI).
The foreign entity can open a project office either on a permanent basis or temporary basis. It is compulsory to complete the registration procedure with RBI & ROC before setting out the business. Project office registration only can be done if the foreign company holds all the requisite conditions and documents.
To register a project office, an application has to be filed with the Category 1 AD Bank, the application is presented with all needed set of documents including the copy of the project or business agreement and an undertaking that explains about the project fund with inward remittance from overseas or through an arrangement with the multilateral or bilateral international finance agency. On getting the approval of application from RBI, the next step in the registration process is to apply for project office registration with the Register and the local police. If the project has zero foreign funding; it is completely Indian entity's responsibility to obtain the term loan from a bank in India or from any Public Financial Institution.
Project Office Registration Online India can be done by submitting an application with the Category 1 AD Bank. Along with an application, the prerequisite set of documents must be submitted that includes the copy of the project agreement and a document stating that the project shall be funded from abroad or through an arrangement with the multilateral or bilateral international finance agency.
The application for establishing Project office in India may be submitted by the non-resident entity in Form FNC (Annex B) to a designated AD Category – I bank (i.e. an AD Category – I bank identified by the applicant with whom they intend to pursue banking relations) along with the prescribed documents mentioned in the Form . The AD Category-I bank shall after exercising due diligence in respect of the applicant’s background, and satisfying itself as regards adherence to the eligibility criteria for establishing Project office, antecedents of the promoter, nature and location of activity of the applicant, sources of funds, etc., and compliance with the extant KYC norms grant approval to the foreign entity for establishing Project office in India. The AD Category-I banks may frame appropriate policy for dealing with these applications in conformity with the FEMA Regulations and Directions.
An applicant that has received permission for setting up of a Project office shall inform the designated AD Category I bank as to the date on which the Project office has been set up. The AD Category I bank in turn shall inform Reserve Bank accordingly. In case, an approval granted by the AD bank has either been surrendered by the applicant or has expired without any Project office being set up, the AD Category I bank shall inform RBI accordingly.
The Project office remains valid for the entire tenure of the project (till the project is completed or wound up).
(1). Compliances under Companies Act:
(A). Section 380: Documents to be Delivered to Registrar by Foreign Companies
Every foreign company shall, within thirty days of the establishment of its place of business in India, deliver to the Registrar for registration—
(E). Section 384: Debentures, Annual Return, Registration of Charges, Books of Accounts and their Inspection:
The provisions of Section 71 shall apply mutatis mutandis to a foreign company.
Every foreign company shall prepare and file, within a period of sixty days from the last day of its financial year, to the Registrar annual return in Form FC.4 containing the particulars as they stood on the close of the financial year.
Books of Accounts:
The provisions of Section 128 shall apply to a foreign company to the extent of requiring it to keep at its principal place of business in India.
Registration of Charges:
The provisions of Chapter VI shall apply mutatis mutandis to charges on properties which are created or acquired by any foreign company.
The provisions of Chapter XIV shall apply mutatis mutandis to the Indian business of a foreign company as they apply to a company incorporated in India.
(2). Compliances under Foreign Exchange Management Act (FEMA) 1999
There are some other compliances like Goods and service tax (GST), Income tax which are also applicable. Authorized Dealer/ Authorized Agency- under the Foreign Exchange Management Act, 1999 the RBI carries out all its functions by assigning it to authorized dealers. Authorized dealers are banks which are under the RBI to carry out activities on behalf of companies and entities. Foreign exchange transactions such as remittances and other forms of activities are performed through the authorized dealer.
Foreign currency accounts by Project Office
Project Offices can open non-interest bearing foreign currency accounts with AD Category – I banks subject to the following:
The permissible debits to the account shall be payment of project related expenses and credits shall be foreign currency receipts from the Project Sanctioning Authority and remittances from parent/group Company abroad or bilateral / multilateral international financing agencies.
A foreign company set up a project office in India if a project has been assigned to them by the government or a private sector when the project has to be executed in India. However, it is necessary to complete the registration process with RBI & ROC before commencing business operations. Therefore, project office registration cannot be done until all the requisite conditions are met.
Yes, provided the bank account is re-designated as a Branch Office account.
Only candidates from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau, and Pakistan will need to enlist with the State Police authorities. Copy of endorsement letter for people from these nations will be set apart by the AD Category I bank to the Ministry of Home Affairs, Internal Security Division – I, Government of India, New Delhi for important activity and record. Every single other nation is absolved from enrolling with the State Police authorities.
No, if a LO/BO needs to open more than one account, it needs to acquire the earlier authorization of the Reserve Bank through its AD Category I bank, supporting the explanation behind the additional account.
The credits to the account should represent the funds received from the head office through normal banking channels for meeting the expenses of the office and/or the rupee amounts receivable, if any, under the contract, and no other amount should be credited without prior permission of the Reserve Bank. Similarly, debits to this account could be raised only to meet the office's local expenses and intermittent remittances pending winding up / completing the project.<
For the intermittent remittances, the AD bank should be satisfied with the bonafide of the transaction and ensure submission of the following documents: