FEMA, Establishment In India Of Branch or Office or other Place of Business, Regulations 2000.

Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000

Notification No.FEMA 22/2000-RB dated 3rd May 2000 - In exercise of the powers conferred by sub-section (6) of Section 6 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank makes the following regulations to prohibit, restrict and regulate establishment in India of a branch or office or other place of business by a person resident outside India, namely:

1. Short Title and Commencement
   1. These Regulations may be called the Foreign Exchange Management (Establishment in India of branch or office or other place of business) (Amendment) Regulations, 2005
   2. They shall come into force with effect from April 25, 2005*.
      
      (Above (i) & (ii) has been amended vide Notification No. FEMA 134/2005-RB, DT. 07/05/2005)
      
      
   "Pre-Revised
   
   1. 1.  These Regulations may be called the Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) (Second Amendment) Regulations, 2003.
      2. They shall come into force from the date of their publication in the Official Gazette of Government of India."
         
         (Above (i) & (ii) has been amended vide Notification No. FEMA 102/2003-RB, DT. 03/10/2003)
         
         
   "Pre-Revised
   
   1. 1.  These Regulations may be called the "Foreign Exchange Management (Establishment in India of Branch or Office or other place of Business), (Amendment) Regulations, 2003.
      2. They shall come into force from the date of their publication in the Official Gazette of Government of India.

(Above (i) & (ii) has been amended vide Notification No. FEMA 95/2003-RB, DT. 02/07/2003)

1. Short title and commencement:-
   1. These Regulations may be called the Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000.
   2. They shall come into force on 1st day of June, 2000.
2. Definitions:-
   In these regulations, unless the context otherwise requires -
   1. 'Act' means the Foreign Exchange Management Act, 1999 ( 42 of 1999);
   2. 'foreign company' means a body corporate incorporated outside India, and includes a firm or other association of individuals;
   3. 'Branch' shall have the meaning assigned to it in sub-section (9) of Section 2 of the Companies Act, 1956 (1 of 1956),
   4. 'form' means a form annexed to these Regulations;
   5. 'Liaison Office' means a place of business to act as a channel of communication between the Principal place of business or Head Office by whatever name called and entities in India but which does not undertake any commercial /trading/ industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal banking channel;
   6. 'Project Office' means a place of business to represent the interests of the foreign company executing a project in India but excludes a Liaison Office;
   7. 'Site Office' means a sub-office of the Project Office established at the site of a project but does not include a Liaison Office;
   8. ‘Stand alone basis’ means such branch offices would be isolated and restricted to the Special Economic Zone alone and no business activity/transaction will be allowed outside the Special Economic Zones in India which includes branches/subsidiaries of its parent office in India.
   9. the words and expressions used but not defined in these Regulations, shall have the same meanings respectively assigned to them in the Act.
      (Above clause h) has been inserted & old h) renumbered as i) vide Notification No. FEMA 102/2003-RB, DT. 03/10/2003)
3. Prohibition against establishing branch or office in India:-
   No person resident outside India shall, without prior approval of the Reserve Bank, establish in India a branch or a liaison office [DELETED - or a project office] or any other place of business by whatever name called:
   
   (In above regulation 3, words 'or a project office' has been deleted vide Notification No. FEMA 95/2003-RB, DT. 02/07/2003)
   
   Provided that no approval shall be necessary for a banking company, if such company has obtained necessary approval under the provisions of the Banking Regulation Act, 1949.
   
   Provided that no approval shall be necessary from RBI for a company to establish a branch/unit in Special Economic Zones (SEZs) to undertake manufacturing and service activities. Provided further that:
   1. such units are functioning in those sectors where 100 per cent FDI is permitted.
   2. such units comply with part XI of the Companies Act (Section 592 to 602),
   3. such units function on a stand-alone basis,
   4. in the event of winding-up of business and for remittance of winding-up proceeds, the branch shall approach an Authorised Dealer in Foreign Exchange with the documents except (A) listed in Regulation 6(1)(iii) of Notification No. FEMA 13/2000-RB dated 3rd May, 2000.
      (Above Second proviso has been added vide Notifiation No. FEMA 102/2003-RB, DT. 03/10/2003)
      
      Provided further that no approval shall be necessary for an insurance company, if such company has obtained approval from the insurance Regulatory and Development Authority established under section 3 of the Insurance Regulatory and Development Authority Act, 1999, for establishing a Liaison Office in India.
      
      (Above proviso has been added vide Notification No. FEMA 134/2005-RB, DT. 07/05/2005)
4. Prohibition against establishing a branch or office in India by citizens of certain countries:-
   
   No person, being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran or China, without prior permission of the Reserve Bank, shall establish in India, a branch or a liaison office or a project office or any other place of business by whatever name called.
5. Application to Reserve Bank for opening branch or liaison office [OLD - or project office etc. ]:-
   1. A person resident outside India desiring to establish a branch or liaison office in India shall apply to the Reserve Bank, in form FNC 1.
   2. A foreign Company may open a Project Office/s in India provided it has secured from an Indian company, a contract to execute a project in India, and
      1. the project is funded directly by inward remittance from abroad; or
      2. the project is funded by a bilateral or multilateral International Financing Agency; or
      3. the project has been cleared by an appropriate authority; or
      4. a company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the project.
   3. The Foreign Company shall furnish a report to the concerned Regional Office of Reserve Bank of India under whose jurisdiction the Project Office is set up, giving details as under:
      1. Name and address of the foreign company
      2. Reference No. and date of letter awarding the contract referred to in clause (ii) of Regulation 5
      3. Total amount of contract
      4. Address and tenure of Project Office
      5. Nature of Project undertaken.
         
      "PRe-Revised
      (ii) Where a person resident outside India has secured from an Indian company a contract to execute a project in India, and
      
      1. the project is funded directly by inward remittance from abroad;
         or
      2. the project is funded by a bilateral or multilateral International Financing Agency,
         or
      3. the project has been cleared by an appropriate authority;
         or
      4. a company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution or a bank in India for the Project,such person shall apply to the Reserve Bank in form FNC 1 for permission to establish a Project or Site Office in India."
         
      [DELETED -
      (iii) The Reserve Bank may grant permission subject to such terms and conditions as may be considered necessary.]
      (In Regualtion 5: in the heading the words, "or Project Office etc.," the word "office" substituted, sub-regulation (ii) substituted & sub-regulation (iii) deleted vide Notification No. FEMA 95/2003-RB, DT. 02/07/2003)
      
      (Pl. refer A.P. (DIR Series) Cir. No. 03/2002-03-RB, Dt. 06/07/2002 for above Regulation 5 (iii) - Branch/Project/Liaison Offices in India of person resident outside India)
      
      Explanation:
      For the purpose of this Regulation,
      
      1. 'a bilateral or multilateral International Financing Agency' means the World Bank or the International Monetary Fund or similar other body;
      2. "Public Financial Institution" is a public financial institution as defined in Section 4A of the Companies Act, 1956.
6. Activities which may be undertaken by the branch or office in India
   1. A person resident outside India permitted by the Reserve Bank under Regulation 5, to establish a branch or a liaison office in India may undertake or carry on any activity specified in Schedule I or, as the case may be, in Schedule II, but shall not undertake or carry on other activity unless otherwise specifically permitted by the Reserve Bank.
   2. Opening of Project Office under clause (ii) of Regulation 5 is permitted in India and such project office shall not undertaken or carry on any other activity other than the activity relating and incidental to execution of the project.
      
      (Above sub-regulation (ii) has been substituted vide Notification No. FEMA 95/2003-RB, DT. 02/07/2003)
      "Pre-Revised
      (ii) A person resident outside India permitted by the Reserve Bank under Regulation 5, to establish a Project or Site Office in India shall not undertake or carry on any activity other than the activity relating and incidental to execution of the project."
7. Remittance of profit or surplus
   A person resident outside India permitted by the Reserve Bank under Regulation 5, to establish a branch or Project Office in India may remit outside India the profit of the branch or surplus of the Project on its completion, net of applicable Indian taxes, on production of the following documents, and establishing the net profit or surplus, as the case may be, to the satisfaction of the authorised dealer through whom the remittance is effected.
   1. For remittance of profit of a branch, -
      1. certified copy of the audited balance-sheet and profit and loss account for the relevant year;
      2. a Chartered Accountant's certificate certifying, -
         1. the manner of arriving at the remittable profit,
         2. that the entire remittable profit has been earned by undertaking the permitted activities, and
         3. that the profit does not include any profit on revaluation of the assets of the branch.
   2. For remittance of surplus on completion of the Project, -
      1. certified copy of the final audited Project accounts;
      2. a Chartered Accountant's certificate showing the manner of arriving at the remittable surplus;
      3. income tax assessment order or either documentary evidence showing payment of income tax and other applicable taxes, or a Chartered Accountant's certificate stating that sufficient funds have been set aside for meeting all Indian tax liabilities; and
      4. auditor's certificate stating that no statutory liabilities in respect of the Project are outstanding.

Schedule I
[See Regulation 6(i)]

Permitted activities for a branch in India of a person resident outside India

1. Export/Import of goods
2. Rendering professional or consultancy services.
3. Carrying out research work, in which the parent company is engaged.
4. Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
5. Representing the parent company in India and acting as buying/selling agent in India.
6. Rendering services in Information Technology and development of software in India.
7. Rendering technical support to the products supplied by parent/group companies.
8. Foreign airline/shipping company.

Schedule II
[See Regulation 6(i)]

Permitted activities for a Liaison office in India of a person resident outside India

1. Representing in India the parent company/group companies.
2. Promoting export import from/to India.
3. Promoting technical/financial collaborations between parent/group companies and companies in India.
4. Acting as a communication channel between the parent company and Indian companies.

FNC 1
(See Regulation 5)

1.  General Instructions to Applicants :
   
   The application form only should be completed and submitted to the Chief General Manager, Exchange Control Department (Foreign Investment Division), Reserve Bank of India, Central Office, Mumbai-400001.
   
2. Documentation :
   1. English version of the certificate of incorporation/registration or Memorandum & Articles of Association attested by Indian Embassy/Notary Public in the country of registration.
   2. Latest Audited Balance Sheet of the applicant company/firm.
      
      [DELETED -
   3. In case of Project Office documentary evidence that the Project is funded by bilateral or multilateral International Financing Agencies OR the project has been cleared by the concerned regulatory authority OR the Indian company has been granted term loan for the concerned Project by a Financial Institution or a Bank in India. ]
      1. 1. Full name and address of the applicant company/firm
            [State whether the applicant is a proprietary
            concern or partnership firm or limited company or public sector
            undertaking or any other organisation
            (Please specify).
         2. Date and Place of incorporation/
            registration.
      2. Details of capital
         1. Paid-up capital _________________ divided into________ shares of _______ each
         2. Free Reserves as perlast audited Balance Sheet
      3. Brief description of the activities of the applicant.
         
      4. FOR LIAISON / BRANCH OFFFICE
         1. Value of goods imported from and/or exported to India bythe applicant during each of the last three years:
            1. Imports from India
            2. Exports to India
         2. Particulars of existing arrangements if any, for representing the company in India.
         3. Particulars of the proposed Branch/Liaison Office
            1. Details of the activities/services proposed to be undertaken/rendered by the office.
            2. Place where the office will be located.
               
         [DELETED -
         
      5. FOR PROJECT OFFICE
         
         If the office is to be opened on a temporary basis in connection with any specific project or contract to be executed in India by the applicant :
         1. Brief description of the project/contract, including terms of payment / duration, etc.
         2. Place where the office will be located
         3. Whether the project office is funded entirely by inward remittances or by any other source
            specified at B (iii)

5. Any other information which the applicant company wishes to furnish in support of this application.

(In Form FNC-1, para B-item (iii) & Clause 5 has been deleted and Clause 6 has been re-numbered as 5 vide Notification No. FEMA 95/2003-RB, DT. 02/07/2003)

We hereby declare that :

1. The particulars given above are true and correct to the best of our knowledge and belief;
2. Our activities in India would be confined to the fields indicated in column 4(iii)(a) or 5(i)above;
3. If we shift the office to another place, we shall intimate the Reserve Bank of India; and
4. We will abide by the terms and conditions that may be stipulated by Reserve Bank of India if approval is given.

Place :

Date:
(Signature of Authorised Official
of the Applicant Company)

Name:

Designation:
Foot Note :

1. * This has been mentioned as the date on which Reserve Bank of India had issued A.P (DIR Series) Circular No. 39 to Authorised Banks dealing in Foreign Exchange.
2. The Principal Regulations were published in the Official Gazette vide GSR No. 408(E) dated May 8, 2000 in Part II, Section 3, Sub-section (i) and subsequently amended as under :-

GSR No. 698(E) dated 01.09.2003
GSR No. 847 (E) dated 29.10.2003

(Foot Note has been vide Notification No. FEMA 134/2005-RB, DT. 07/05/2005)

(Please refer Circular No. 58/2003-04-RB, DT. 16/01/2004 for Establishment of Branch Offices/Units in Special Economic Zones)