Liaison Office in India

Introduction

What Is a Liaison Office?

Difference: Liaison Office vs Branch Office vs Project Office

Activities Allowed for a Liaison/Representative Office

Activities NOT Allowed (Compliance Critical)

Liaison Office vs Representative Office – Are They the Same?

Eligibility Criteria for Opening a Liaison Office in India

Profit-Making Track Record

To qualify for a Liaison Office in India, the foreign parent company must have earned profit for the last 3 consecutive financial years.

Net Worth Requirement

The company must have a minimum net worth of USD 50,000 (or equivalent), properly certified by its international banker. This is a core financial requirement when opening a liaison office in India.

Clean Background

The parent company must not have any criminal, regulatory, financial, or compliance-related issues in its home country.

Parent Company Documents

Basic corporate documents are needed, incorporation certificate, audited financials, charter papers, and other company records typically required for a representative office in India.

RBI Guidelines

All applications must follow FEMA 22 and the RBI Master Direction for LO/BO/PO setups. These guidelines decide whether the company is eligible.

Foreign Company Incorporation Proof

Documents like COI, Charter Papers, Memorandum/Articles of Association, or Bylaws must be submitted to validate the company’s legal existence.

Who Can Open a Liaison Office in India?

Documents Required from Parent Company

Step-by-Step Process for Opening a Liaison Office in India

Consultation & Documentation Drafting

The process begins with checking whether the foreign company is eligible to open a Liaison Office. Once confirmed, all required documents are drafted, including the LO application, parent company papers, financial statements, and board approvals. This is the stage where the entire file is prepared properly before it goes to the bank.Read moreRead less

The process begins with checking whether the foreign company is eligible to open a Liaison Office. Once confirmed, all required documents are drafted, including the LO application, parent company papers, financial statements, and board approvals. This is the stage where the entire file is prepared properly before it goes to the bank.

Application Through AD Category-I Bank

Foreign companies cannot approach the RBI directly. Instead, the complete application is submitted to an Authorized Dealer (AD Category-I) Bank such as HDFC, ICICI, or SBI. The bank reviews the documents, performs due diligence, and only after they are satisfied does the application move forward.Read moreRead less

Foreign companies cannot approach the RBI directly. Instead, the complete application is submitted to an Authorized Dealer (AD Category-I) Bank such as HDFC, ICICI, or SBI. The bank reviews the documents, performs due diligence, and only after they are satisfied does the application move forward.

Submission on the FIRMS Portal

Once the bank clears the file, the application is uploaded to the RBI’s FIRMS portal. This is where all Liaison Office requests are officially reviewed by the Reserve Bank.Read moreRead less

Once the bank clears the file, the application is uploaded to the RBI’s FIRMS portal. This is where all Liaison Office requests are officially reviewed by the Reserve Bank.

RBI Review & UIN Issuance

The RBI examines the entire application, verifies eligibility, and once everything is approved, issues a Unique Identification Number (UIN). This UIN is the official approval for establishing a Liaison Office in India.Read moreRead less

The RBI examines the entire application, verifies eligibility, and once everything is approved, issues a Unique Identification Number (UIN). This UIN is the official approval for establishing a Liaison Office in India.

PAN & TAN Registration

After receiving UIN approval, the Liaison Office must apply for PAN and TAN. These are compulsory for tax compliance, even though the office cannot earn any income in India.Read moreRead less

After receiving UIN approval, the Liaison Office must apply for PAN and TAN. These are compulsory for tax compliance, even though the office cannot earn any income in India.

Opening the Bank Account

A dedicated bank account is then opened for the Liaison Office. This account can only receive inward remittances from the foreign parent company. No local income, payments, or business receipts are allowed to enter this account.Read moreRead less

A dedicated bank account is then opened for the Liaison Office. This account can only receive inward remittances from the foreign parent company. No local income, payments, or business receipts are allowed to enter this account.

Registration with the ROC (MCA)

The next step is registering the Liaison Office with the Registrar of Companies. This involves filing the required forms under the Companies Act, submitting address proofs, and officially recording the LO’s presence with the Ministry of Corporate Affairs. Once approved, the Liaison Office becomes legally recognized in India.Read moreRead less

The next step is registering the Liaison Office with the Registrar of Companies. This involves filing the required forms under the Companies Act, submitting address proofs, and officially recording the LO’s presence with the Ministry of Corporate Affairs. Once approved, the Liaison Office becomes legally recognized in India.

Setting Up Compliance Systems

After registration, the office needs to put in place systems for accounting, FLA filing, AAC filing, and other regulatory tasks. This ensures the Liaison Office stays compliant throughout the year and meets all RBI and MCA reporting requirements.Read moreRead less

After registration, the office needs to put in place systems for accounting, FLA filing, AAC filing, and other regulatory tasks. This ensures the Liaison Office stays compliant throughout the year and meets all RBI and MCA reporting requirements.

GST Registration

Most Liaison Offices don’t require GST because they cannot carry out any commercial activity. However, in rare situations involving special representational work, GST registration may be required. This is assessed case-by-case.Read moreRead less

Most Liaison Offices don’t require GST because they cannot carry out any commercial activity. However, in rare situations involving special representational work, GST registration may be required. This is assessed case-by-case.

Yearly Reporting & Compliance

The final step is establishing the yearly compliance routine. This includes filing the Annual Activity Certificate (AAC) with the RBI, submitting the FLA return, updating ROC filings, handling bank reporting, maintaining proper books of accounts, and conducting audits if applicable. These filings ensure the Liaison Office remains fully compliant every financial year.Read moreRead less

The final step is establishing the yearly compliance routine. This includes filing the Annual Activity Certificate (AAC) with the RBI, submitting the FLA return, updating ROC filings, handling bank reporting, maintaining proper books of accounts, and conducting audits if applicable. These filings ensure the Liaison Office remains fully compliant every financial year.

Common Mistakes Foreign Companies Make

1. Applying without checking basic eligibility:
   Companies often jump into the process without confirming net-worth or profitability requirements. This leads to quick rejection from the AD Bank.
2. Submitting incomplete or incorrect documents:
   Missing apostilles, outdated financials, or incorrectly drafted board resolutions are major reasons for delays during the opening a liaison office in India.
3. Assuming the Liaison Office can do business:
   Many companies believe they can invoice clients, sign contracts, or generate revenue. This is strictly prohibited and violates FEMA guidelines.
4. Opening the wrong type of bank account:
   A Liaison Office can operate only an inward-remittance account. Trying to open a standard current account creates unnecessary compliance hurdles.
5. Missing yearly RBI and ROC filings:
   Skipping filings like AAC, FLA, or MCA annual returns is very common, and can result in penalties or even cancellation of approval.
6. Choosing the wrong local representative:
   Appointing someone unfamiliar with Indian compliance requirements leads to preventable errors and communication delays.
7. Using a non-compliant office address:
   RBI requires a valid commercial office address. Many applications get stuck because the submitted address proof is not acceptable
8. Forgetting about renewal timelines:
   Some Liaison Offices need renewal every three years, and companies often overlook this, putting their India presence at risk.

Timeline for Opening a Liaison Office in India

Post-Setup Compliance Requirements

• Annual Activity Certificate (AAC):
  Prepared by a Chartered Accountant and submitted to the AD Bank as well as the RBI to confirm all office activities.
• Filing with DGFT / AD Bank:
  Any changes in office details, directors, or activities must be promptly reported to the AD Bank and DGFT.
• ROC Annual Returns (MCA):
  Includes filing of AOC-5 and Annual Return (Form FC-3) to comply with Companies Act requirements.
• FLA Return:
  Mandatory submission of Foreign Liabilities and Assets details, reflecting all inward remittances and obligations.
• Renewals:
  Some Liaison Offices may require formal renewal after 3 years, depending on RBI approval terms.
• Books of Accounts:
  Maintain proper Indian books of accounts recording inward remittances, operational expenses, and other financial records.

Yearly Compliance Checklist

Benefits of Setting Up a Liaison Office in India

Taxation for a Liaison Office in India

• It does not generate any income or revenue within India from any sources.
  
• It does not sign any business contracts, agreements, or commercial deals with Indian clients.
• It does not engage in any commercial, trading, or revenue-generating activities.

• The office performs any type of commercial activity or starts generating revenue directly or indirectly.
• It acts as a fixed place Permanent Establishment (PE) for the foreign parent company in India.
• It indirectly earns income or receives profits on behalf of the foreign entity through Indian operations.

• Not applicable in normal cases because no financial transactions or business dealings occur in India.

Why Choose Taxlegit for Liaison Office Setup in India?

• End-to-End Documentation, Apostille, Notarization:
  Taxlegit manages the complete paperwork process, including all document drafting, apostille, and notarization, ensuring a hassle-free setup.
• RBI + ROC Filings Handled Fully:
  We take care of all regulatory filings with RBI and ROC, so your Liaison Office is fully compliant from day one.
• Project-Managed by Taxlegit’s Foreign Desk:
  A dedicated foreign desk ensures smooth coordination and expert handling of every step of your Liaison Office setup.
• Dedicated Manager for International Clients:
  Our specialized managers provide personalized guidance tailored to clients from different regions and industries.
• Compliance Dashboard for Yearly Filings:
  Stay on top of all statutory requirements with our user-friendly compliance dashboard for ongoing filings and deadlines.
• Guidance for Market Entry & India Strategy:
  We provide strategic advice for entering the Indian market and planning long-term operations effectively.
• Quick Turnaround Time:
  Efficient processes and expert handling ensure your Liaison Office is approved and operational as quickly as possible.
• 100% RBI-Compliant Process:
  Every step is designed to meet RBI regulations, minimizing any risk of non-compliance.
• Experience with Multiple Industries & Global MNCs:
  Our team has successfully set up Liaison Offices for a wide range of industries and multinational companies, bringing practical expertise to every project.