Presentation of opening of foreign branch offices by an Indian Company

1. SETTING UP OF
BRANCH OFFICE
ABROAD
Contributed by
CS Sowrabh S Rao
CS Vineeth T
CS Nikita Agarwal

2. INTRODUCTION
Branch office:-
Section 2(14) of Companies Act, 2013 – any
establishment decsribe as such by the company
Who can establish a branch abroad?
A person resident in India can establish a branch or
liaison office outside India or he can establish a JV or
WOS with a person resident outside India.

3. Branch Office Vs. Liaison Office Vs. Project Office
Branch Office Liaison Office Project office
Office established
outside India by an
Indian entity for
conducting normal
business activity
abroad
It acts as a channel of
Communication
between Head Office
in India and parties
abroad.It is not allowed
to undertake any
business activity.
A temporary office
established abroad for
a specific project.

4.  Benefits of setting up of branch abroad
• Spreading up of Business
• Increasing Customer Base
• Easy accessibility of product
• Geographical Benefits

5. HOW TO ESTABLISH A BRANCH OFFICE
ABROAD?

6. Residential Status:- Overseas Branch office
will be considered as resident of India
STEPS INVOLVED
• Approval of Board for establishment of
Branch
• Appointment of Authorised Representative
• Opening of Bank Account
• Filing of forms and applications, along with
supporting documents to RBI through AD
• Compliance with country specific

7.  No specific approval of RBI is required subject to
compliance of following conditions.
1. Conducting normal business activities of Indian Entity
2. The details of bank account opened in the overseas countries
should be promptly reported to the banker of Indian entity
3. Profits, if any, earned by the overseas office(s) should be
repatriated to India
4. Remittance of expenses by Indian Entity
 Initial Expenses :- 15 per cent of the average annual
sales/ income or turnover of the Indian entity during the
last two financial years or
up to 25 per cent of the net worth whichever is higher
 Recurring Expenses :- 10 per cent of such average
annual sales/ income or turnover during the last financial
years

8.  Exemption for restriction on remittance of
expenses
• If remittances are made out of funds held in
EEFC account of Indian Entity
• Within 2 years of establishment of branch in
100% EOU or EPZ or STP/HTP

9. 3. The details of bank account opened in the
overseas countries should be promptly
reported to the banker of Indian firm / company
4. Profits, if any, earned by the overseas
office(s) should be repatriated to India
 Failure to satisfy the above condition
requires RBI approval through AD

10.  Acquisition of Property for branch office
•Purchase of Office equipments and other
assets for the normal business operations of
the overseas branch office shall not be
treated capital account transactions and
hence No RBI permission.
•Acquisition of immovable property outside
India by way of lease, not exceeding a period
of five years by the overseas branch or office
is permitted without obtaining the RBI’s
permission.

11.  Prohibition on activities of Branch Office:
• Shall not enter into contract or agreement in
contravention of the Act or rules or
regulations applicable to it.
• Shall not create any financial or contingent
liabilities for head office in India.
• Shall not invest surplus fund abroad without
prior approval of RBI but such surplus fund
should be repatriated to India.

12.  Documents to be submitted
• Form A2
• TT Application
• Form OBR- Along with the following documents
• Correspondence, if any, in original together with
photocopies regarding the arrangement made in foreign
Countries.
• Bank certificate together with copies for immediately
preceding four calendar half years in support of export
realization.
•Particulars of the turnover duly certified by the
Statutory Auditors.
back

13.  COUNTRY SPECIFIC REQUIREMENTS
1. New Zealand
- Reservation of name by the branch
- File application for registration within
10 working days along with the
required documents
- Post registration requirements

14. 2. Portugal
- Appostalised Documents to Commercial
Registry
- Post Registration
- Balance sheet and Profit and loss
account of Company and Branch
Separately
- IT return in form “Modelo 22” within 5th
month of end of FY

15. 3. CYPRUS
- Documents to be filed with National Registrar
of Companies within 1 month of setting up of
branch prior registration.
- Documents submitted required to be
notarised, apostalised and translated into
Greek Language.

16. Thank You
***