Starting Business in India

Establishing a Project Office in India with KKKD & Co.

Expanding into new markets is a crucial step for foreign companies looking to tap into India’s vast business potential. When a foreign company secures a contract in India and needs to establish a temporary base to execute a specific project, setting up a project office is the most efficient solution. At KKKD & Co., we offer expert assistance in establishing and managing project offices in India, ensuring compliance with all regulatory requirements.

What is a Project Office?

A project office is a temporary business presence established by a foreign company in India for the sole purpose of executing a specific project or contract. Unlike a liaison office, a project office is designed to facilitate the completion of particular contracts, allowing foreign companies to establish a base in India for the duration of the project.

Conditions for Establishing a Project Office

Foreign companies can open a project office in India without the need for prior approval from the Reserve Bank of India (RBI), provided certain conditions are met. These conditions ensure that the project is legitimate and financially supported. Specifically, a foreign company can establish a project office in India if:

• The Project is Funded by Inward Remittance: The project must be funded directly by remittances from abroad.
• Funding from International Agencies: The project is financed by a bilateral or multilateral international financing agency.
• Clearance by Appropriate Authorities: The project has received approval from the relevant authorities in India.
• Term Loan Granted to the Indian Contractor: A company or entity in India that has awarded the contract must have received a term loan from a public financial institution or bank in India for the project.

If any of these conditions are not met, the foreign company must obtain prior approval from the RBI to establish a project office in India.

Remittance Facilities for Project Offices

Once a project office is established, it is allowed to open and operate a bank account in India, including a foreign currency account. The expenses of the project office can be covered through inward remittances from the head office or from rupee funds received locally under the approved contracts. Outward remittances from the project office’s bank account are permitted, subject to compliance with specific regulatory requirements.

Taxation of Project Offices

A project office is considered an extension of the foreign company in India. As such, any income earned by the project office is taxable under Indian law, in accordance with the Income-tax Act, 1961. It is important for foreign companies to ensure that they comply with all tax obligations to avoid any legal issues.

Exit Options: Closing a Project Office

Closing a project office in India is a relatively straightforward process, especially given the temporary nature of its operations. The closure process typically takes five to six weeks. The required steps for closure depend on how the project office was initially established:

• Approval Route: If the project office was established with RBI approval, an application for closure must be submitted to the regional office of the RBI, along with the prescribed documentation.
• General Permission Route: If the project office was established under general permission, the application for closure should be submitted to the Authorized Dealer.

How KKKD & Co. Can Assist You

At KKKD & Co., we provide comprehensive support to foreign companies looking to establish and manage a project office in India. Our services include:

• Assistance in establishing a project office under RBI guidelines
• Advising on compliance with financial and regulatory requirements
• Facilitating the opening and operation of bank accounts for the project office
• Ensuring compliance with Indian taxation laws
• Guiding the closure process for project offices in a timely and efficient manner

Navigating the complexities of setting up a project office in India requires expert guidance. KKKD & Co. is here to help you every step of the way, ensuring your project runs smoothly and in full compliance with Indian regulations. Contact us today to learn more about how we can support your business operations in India.

Establishing a Branch Office in India with KKKD & Co.

Expanding into the Indian market can be a strategic move for foreign companies seeking to tap into one of the world’s fastest-growing economies. One way to do this without directly investing in or establishing an Indian subsidiary is by setting up a branch office. At KKKD & Co., we provide expert guidance and support to foreign companies looking to establish a branch office in India, ensuring full compliance with all regulatory requirements.

What is a Branch Office?

A branch office is a business presence in India established by a foreign company to engage in certain approved activities. Unlike a liaison office, which is limited to non-commercial activities, a branch office allows a foreign company to undertake trading or commercial activities in India. However, these activities must be pre-approved by the Reserve Bank of India (RBI).

Scope of Activities for Branch Offices

Branch offices are permitted to undertake only those activities approved by the RBI. Typically, these activities include:

• Export and Import of Goods: Facilitating trade between the parent company and Indian markets.
• Professional or Consultancy Services: Providing specialized services such as legal, engineering, or financial consulting.
• Research and Development: Conducting research activities aligned with those of the parent company.
• Technical and Financial Collaborations: Promoting partnerships between Indian companies and the parent/overseas group companies.
• Representation: Acting as a representative of the parent company in India, including serving as a buying or selling agent.
• Information Technology and Software Development: Providing IT services or developing software in India.
• Technical Support: Offering technical support for products supplied by the parent or group companies.
• Foreign Airline/Shipping Operations: Operating as a branch for foreign airlines or shipping companies.

In Special Economic Zones (SEZs), 100% Foreign Direct Investment (FDI) is allowed in setting up a stand-alone branch. However, such branches are restricted to operating solely within the SEZ and cannot conduct business activities outside the SEZ, including interactions with branches or subsidiaries of the parent company in India.

Approval Process

To establish a branch office in India, an application must be submitted to the RBI in the prescribed form. The approval process generally takes four to five weeks. However, if the application is referred to a relevant administrative ministry for comments (as may be required for banking entities), the processing time may increase. It is important to note that no prior RBI approval is needed to set up a branch office in a SEZ, as per the provisions of the SEZ Act.

Remittance Facilities

Upon receiving RBI approval, a branch office is permitted to open a bank account in India. This account can be used to meet expenses related to the branch’s operations in India and to credit income generated from these activities. Branch offices are allowed to repatriate profits generated in India on an ongoing basis, subject to compliance with certain procedural requirements.

Taxation of Branch Offices

A branch office is considered an extension of a foreign company in India, meaning that any income earned by the branch is subject to taxation under Indian law, as per the Income-tax Act, 1961. However, if a tax treaty exists between India and the foreign company’s home country, and the provisions of the treaty are more beneficial, the foreign company may elect to be taxed under the treaty provisions.

Exit Options: Closing a Branch Office

The process for closing a branch office in India typically takes six to eight weeks. The foreign company must submit an application with the required documentation to the Central office of the RBI. Additionally, the company must deregister with the Registrar of Companies (ROC).

Registration with the Registrar of Companies (ROC)

Beyond obtaining RBI approval, the foreign company must also register with the Registrar of Companies (ROC) within 30 days of establishing the branch office. The ROC will then issue a certificate confirming the establishment of the place of business in India.

Entry Requirements for Doing Business in India

Foreign companies looking to establish a presence in India can also consider setting up a Public Limited Company or a Private Limited Company. Each of these options has its own set of requirements:

Public Limited Company

• Minimum Shareholders: At least seven shareholders are required.
• Certificate of Commencement: Business activities can only begin after obtaining a ‘Certificate of Commencement of Business.
• Prospectus: The company must release a prospectus or statement to sell its securities.
• Minimum Directors: At least three directors must be on the board.
• Statutory Meetings: Regular statutory meetings are mandatory.

Private Limited Company

• Shareholder Limit: A maximum of 50 shareholders is allowed, with a minimum requirement of 2.
• Share Restrictions: Shares cannot be traded or transferred publicly.
• Ownership: Private limited companies are not owned by any governmental body and do not offer public shares.

How KKKD & Co. Can Assist You

KKKD & Co. offers comprehensive services to assist foreign companies in setting up branch offices in India. Our services include:

• Guidance through the RBI approval process
• Advising on permissible activities and compliance requirements
• Assisting with opening and managing bank accounts
• Ensuring compliance with Indian tax laws and tax treaty provisions
• Facilitating registration with the ROC
• Supporting the closure process when the branch office is no longer needed

Expanding your business into India requires expert navigation of regulatory and legal frameworks. KKKD & Co. is your trusted partner in making this process seamless and compliant, allowing you to focus on growing your business. Contact us today to learn more about how we can support your entry into the Indian market.