Registering a branch office allows a foreign firm to function as a legal business entity in India. The branch office can do business as the parent firm does in their home country. Nonetheless, a branch office is constrained when it comes to industrial activity. A branch office, for example, cannot directly engage in manufacturing operations, but it might subcontract these tasks to an Indian manufacturer.

 Requirements for establishing a branch office- 

·        The applicant firm must be formed outside of India; 

·        The name of the Indian branch office must be the same as the parent business (if the branch office does not generate income from Indian activities, the head office must cover its expenditures);

·        The branch office’s net value cannot be less than US $100,000, and 

·        The parent firm must have made a profit in the previous five fiscal years in the home nation.

 Registration of the branch office–

To establish a branch office in India, a foreign firm must get permission from the Reserve Bank of India (RBI) under the Foreign Exchange Management Act (FEMA) requirements, 1999.

 Foreign firms whose primary business falls under sectors where 100% FDI is permitted under the automatic route must complete the FNC form and submit it to the RBI, along with the required paperwork.

 The form must be submitted to the Ministry of Finance for all other sectors. In this situation, the foreign firm must apply to open a branch office to the RBI through a recognized AD Category – I bank.

 If the foreign entity desires to open a branch office in more than one place in India, it must register the branch or obtain RBI clearance for each site individually. The RBI must also approve any activity the branch office wants to carry out in India.

 The registration processes need a foreign firm to deposit the following forms:

·        AR’s signature on the FNC form; 

·        Information regarding the parent business, including its certificate of incorporation, attested by a Notary Public or the Indian Embassy in the country of registration;

·        The incorporation documentation for the upcoming branch office in India;

·        Evidence of registered office;

·        Make a note of the location or intended activity;

·        The applicant entity’s most recent audited financial sheet;

·        Board decided to create a branch office, KYC of the authorized signatory, and provide Information about the parent company’s local representatives in the branch office.

 Permitted Activities-

A branch office in India cannot directly carry out manufacturing operations unless they are in a special economic zone (SEZ) to export items out of India. It may even outsource such work to an Indian firm. Furthermore, a foreign company must be engaged in trading and manufacturing activities in its home country to establish a branch office in India for the following actions: export or import of goods; professional or consultancy services; research work; and representing and acting as a buying or selling agent for the parent company. 

Taxation

A branch office has no legal entity and is governed by the same laws as its parent office. As a result, a branch office in India is treated as a foreign corporation and must pay tax at 40% plus relevant surcharges and cess.