Setting Up Liaison Office

Foreign Entities Forming of a Liaison Office in India

Opening a liaison office is one of the finest strategies to gain traction in this fast-paced sector. You can establish connections, carry out market research, and investigate commercial prospects in this office. India provides a favorable environment for corporate expansion because of its robust economic growth, thriving companies in a variety of industries, and a government that welcomes foreign investment. The nation also has a large pool of trained and qualified workers, which will guarantee the smooth functioning of your business. So, get ready as we guide you through the concept of a liaison office, the steps to set it up, insights into the registration process, you’ll need to get started.
A Liaison Office (LO) serves as a non-commercial representative of a foreign company in India. It acts as a communication bridge between the head office and Indian entities, without engaging in any revenue-generating activity. As per the latest guidelines issued by the Reserve Bank of India (RBI), foreign companies can establish a Liaison Office in India by obtaining prior approval from the RBI through the AD Category-I bank under FEMA regulations.
Governing Law:
Foreign Exchange Management Act, 1999 regulated by Reserve Bank of India
Master circulars issued by the Reserve Bank of India from time to time
Permitted activities of a Liaison Office include:
Acting as a communication and coordination channel between the parent company abroad and Indian stakeholders.
Promoting imports and exports from or to India by disseminating product or service-related information.
Facilitating technical and financial collaborations between the parent company and Indian entities.
Representing the foreign company in India for market research, business exploration, and brand visibility.
Collecting market intelligence to understand business trends and potential for the parent company.
Opening a non-interest-bearing INR current account with a Category-I authorised bank to manage operational expenses
Compliance & Tax Registration:
To ensure full compliance with legal obligations, diligently complete all required annual reports and maintain precise financial records.
The Liaison Office shall also obtain Permanent Account Number (PAN)/ Tax Deduction number(TAN) from the Income Tax Authorities, open the bank account on setting up the offices in India and report the same in the Annual Activity Certificate. Annual Compliance Filing of Annual Activity Certificate (taken from the Chartered Accountant) every year with designated AD Category -I bank as well as Director General of Income Tax (International Taxation), New Delhi along with audited Financial Statements.
Liaison Office is strictly prohibited from undertaking any commercial, trading, or industrial activity in India, either directly or indirectly. It cannot earn any income in India and must meet its local expenses through remittances from the parent company.

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