A Project Office (PO) in India serves as a temporary establishment for a foreign company to execute specific projects, typically in the construction, turnkey, or installation sectors. This guide provides a step-by-step process for setting up a Project Office, including regulatory requirements, compliance obligations, and benefits.
A Project Office is a business establishment set up by a foreign entity to execute a specific project in India. Unlike a branch or liaison office, a Project Office is project-specific and exists only for the duration of the assigned project. It can lease premises, hire staff, and conduct operations necessary for completing the project.
3.1 Robust Economy
India’s growing economy offers vast business opportunities across multiple industries.
3.2 Skilled Workforce
India provides access to a highly skilled, cost-effective workforce.
3.3 Infrastructure Development
Ongoing investments in infrastructure development present lucrative opportunities for foreign companies.
Foreign companies can set up a Project Office if:
• They have secured a contract from an Indian company.
• The project is funded through:
o Direct inward remittance from abroad.
o A bilateral or multilateral International Financing Agency.
o Approval from an appropriate authority.
o A term loan from a Public Financial Institution or a bank in India.
5.1 Documentation and Preparation
Foreign entities must prepare and submit:
• Memorandum & Articles of Association (MOA & AOA)
• Board Resolution authorizing the establishment of the PO
• Project Award Document (proof of project contract)
• Financial statements of the past three years
• Letter of reference from the foreign company’s banker
5.2 Application Submission
• Submit Form FNC to a designated Authorized Dealer (AD) Category-I Bank.
• Provide all required documents, including a Letter of Comfort (LOC) if necessary.
5.3 Unique Identification Number (UIN) Allotment
• The AD Category-I Bank forwards the application to the RBI.
• The RBI issues a UIN, serving as a unique identifier for the PO.
5.4 Approval Grant
• The AD Bank reviews the application and grants approval after due diligence.
5.5 Registration with the Registrar of Companies (ROC)
• Post RBI approval, register the PO with the ROC under the Companies Act, 2013.
• Obtain a Certificate of Establishment.
5.6 PAN, TAN, and GST Registration
• Apply for a Permanent Account Number (PAN) and Tax Deduction Account Number (TAN).
• Register for GST, IEC (if applicable), and other industry-specific licenses.
5.7 Bank Account Opening
• Open two foreign currency accounts:
o One in USD
o One in the home currency of the parent company
• Both accounts must be maintained in the same AD Category-I Bank.
5.8 Compliance with Local Laws
• Adhere to labor laws, tax regulations, and RBI norms.
• Submit annual filings to the AD Bank and ROC.
6.1 Annual Activity Certificate (AAC)
• Submit AAC to the AD Bank and ROC by March 31 each year.
6.2 Compliance for Specific Countries
• Foreign entities from Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, Macau, and Pakistan must register with local police authorities.
6.3 Remittance and Closure Compliance
• Any remittance outside India must not impact project completion.
• If additional funds are required, they must be sourced from abroad.
To close a PO and remit funds:
• Submit a request to the AD Bank with:
o RBI/AD Bank approval for establishment
o Auditor’s certificate verifying asset disposal and liability settlement
o Confirmation of no pending legal proceedings in India
o Proof of AAC submission
• AD Bank ensures compliance before permitting fund remittance.
8.1 Taxation
• A Project Office is subject to Indian tax laws, including corporate tax, GST, and TDS obligations.
8.2 Foreign Currency Management
• All financial transactions must comply with the Foreign Exchange Management Act (FEMA) guidelines.
8.3 Industry-Specific Approvals
• Sectors like defense, telecom, and banking may require additional approvals from sectoral regulators.
Setting up a Project Office in India provides foreign companies a streamlined way to execute projects without heavy compliance burdens. Adhering to regulatory guidelines ensures smooth operations, enabling companies to capitalize on India’s growing market while maintaining legal compliance.
A Project Office registration / incorporation is ideal for businesses looking to expand in India. However, it comes with increased compliance and regulatory requirements. With expert assistance from Return Filings, you can ensure a smooth registration and compliance process for your Project Office registration / incorporation and compliance in India. For professional assistance, reach out to us on email: info@returnfilings.com or on whatsapp: https://wa.me/919910123091.
