There are certain conditions for opening a branch in India for a foreign company. A branch can be opened for specific purposes, and there are some requirements and conditions for opening a branch office in India.
Branch in India - Purposes
Foreign companies, including USA companies, are allowed to set up Branch Offices in India for the following purposes:-
Requirements and Conditions of a Branch Office
Documents required for forming a Branch Office in India
Currently as per the RBI Requirement the application for the branch office and BRANCH office is submitted through the Authorized dealer. The authorized dealer means the various institution having banking licenses.
The following filings are required to open a branch office in India:-
Form FNC 1 (Three copies)
The applications from such entities in Form FNC will be considered by the Reserve Bank under two routes:-
Reserve Bank Route:- Where principal business of the foreign entity falls under sectors where 100 per cent Foreign Direct Investment (FDI) is permissible under the automatic route.
Government Route:- Where principal business of the foreign entity falls under the sectors where 100 per cent FDI is not permissible under the automatic route. Applications from entities falling under this category and those from Non - Government Organisations / Non - Profit Organisations / Government Bodies / Departments are considered by the Reserve Bank in consultation with the Ministry of Finance, Government of India.
Other Incorporation Requirements for Branch Office
Every Branch office registered with RBI shall get itself registered with the Ministry of Corporate Affairs, It is a registration by the Branch office as a establishment of foreign company in India. On such registration a CIN i.e., Corporate Identity Number is allotted by the Registrar of Companies. The following documents shall be filled with the Registrar of Companies :-
Form FC-1 Charter, statutes or memorandum and articles of association or other Instrument constituting or defining the constitution of the company(In the manner provided under Rule 16, 17 of the Companies (Central Government's) General Rules and Forms, 1956).
After Incorporation, the following requirements are also necessary for a branch office:-
Branch Offices are permitted to 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 through whom the remittance is effected :-
a) A Certified copy of the audited Balance Sheet and Profit and Loss account for the relevant year;
b) Chartered Accountant’s certificate certifying -
i) the manner of arriving at the remittable profit. that the entire remittable profit has been earned by undertaking ii) the permitted activities.
iii) that the profit does not include any profit on revaluation of the assets of the branch.
Taxation rules applicable Office
Branch office will be liable to pay 40% (plus surcharges as applicable) of profits as income tax in the status of Foreign Company in India. As per the functioning of branch office in India, it shall be liable to different indirect taxes as well, for example, if the Branch is providing technical services it shall be liable to pay service tax @ 14.5% (plus surcharges) and if it is selling the goods in India then it shall be liable to pay Value added Tax (VAT) and/or Central Sales Tax (CST) at the rates prescribed for the dealt product. There is Local Body Tax (LBT) if the goods are entering the state of Maharashtra in India as few of these indirect taxes are levied by States. With the implementation of GST, the indirect tax regime in India will get simplified.Profits earned by the branch offices are freely remittable from India, subject to payment of applicable taxes.
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