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Liasion office in India of foreign company
It requires RBI's approval. Main form is FCN1.
Liaison Office is not permitted to undertake any commercial / trading / industrial activity, directly or indirectly, and cannot, therefore, earn any income in India. It is required to maintain itself out of inward remittances received from abroad through normal banking channels. Hence it does not constitute a taxable entity in India.
However, taxable amounts of payees have to be withheld popularly called Tax deduction at source by this liasion office before making payments.

Activities of the Liaison office

  • Representing in India the parent Company / group Companies.
  • Promoting export/ import from/ to India.
  • Promoting technical / financial collaborations between the parent / group companies and companies in India.
  • Acting as a communication channel between the parent company overseas and Indian companies.

Restrictions on the activities of the liaison office

  • No commercial operation can be done by the liaison office (No invoicing).
  • The liaison office must maintain a QA22C account with the bank. This is a special account that only allows inflows from abroad.
  • The liaison office can neither borrow, nor lend money.
  • It must file regular returns to the RBI. Such returns must include Audited Annual accounts and an activity report for the year.
The foreign company is also required to obtain a Certificate of establishment of place of business in India from the Registrar of Companies (ROC).