Compliance by Branch Offices

RBI Compliance Annual Activity Certificate

Branch offices and liaison offices should file an Annual Activity Certificate (AAC) at the end of each financial year, i.e. March 31. The AAC should be obtained from a qualified Chartered Accountant. A copy of the AAC along with the audited Balance Sheet should also be filed with the designated Category I Bank's AD on or before September 30 of that year. A copy of the same should also be sent to the Directorate General of Income Tax (International Taxation), New Delhi.

In case the annual accounts of the LO/BO are finalized on a date other than March 31, the AAC and audited Balance Sheet should be submitted within six months from the date of preparation of the balance sheet to the designated AD from a Category I Bank.

Registrar of Companies, Compliance

Compliance under Company Law

  • Annual Filing
  • Foreign companies should prepare a Balance Sheet and Profit & Loss Account Statement and file a copy with the ROC. If such documents are not in English, a certified translation should also be annexed.

  • Periodic Filing
  • Foreign companies are required to file periodic returns with the ROC in the following events:

    • Changes in Charter documents/Memorandum and Articles or any other instrument that defines the foreign company's constitution.
    • Change of address for Registered/Principal offices of the foreign company.
    • Change of Directors or Secretary of foreign company.
    • Change of Authorized Representative(s) in India and changes in the name or address of such person.
    • Change of the principal place of business in India.

Tax laws

The tax treatment of a branch office is different from that of a company registered in India. The present tax rate applicable to a foreign company branch is 42%. Apart from direct tax, a branch of a foreign company should also comply with all prescribed regulatory requirements under Indian Income Tax laws.

On the other hand, a liaison office cannot generate any income in India and is hence not required to pay any taxes. A liaison office should fulfill compliance requirements, including filing Annual Activity Certificate form at the end of each year and any other compliance requirements as applicable from time to time.

Prohibition of FDI

FDI is prohibited in the following sectors:

  • Retail trading (except single brand product retailing).
  • Atomic energy.
  • Lotteries including government, private or online lotteries
  • Gambling and betting businesses including casinos.
  • Chit funds.
  • Nidhi companies.
  • Agricultural or plantation activities.
  • Real estate business* or construction of farm houses.
  • Trading in Transferable Development Rights (TDRs).
  • Agriculture (excluding floriculture, horticulture, development of seeds, animal husbandry, pisciculture, cultivation of vegetables, mushrooms, etc. under controlled conditions and services related to agro and allied sectors), and plantations (other than tea plantations).
  • Manufacturing of cigars, cheroots, cigarillos and cigarettes from tobacco or tobacco substitutes. *Real estate business does not include the development of townships, construction of residential/commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, etc.
  • Partnership firms/proprietary establishments with foreign investments as per FEMA regulations cannot operate in the print media sector.

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