Table of Contents

RBI Compliance for Foreign Companies in India: BO, LO & PO Requirements

1. Introduction

Foreign entities looking to establish a presence in India have three primary options:

a. Branch Office (BO)

b. Liaison Office (LO)

c. Project Office (PO)

Each of these entities must comply with regulations under:

• Reserve Bank of India (RBI) Act

• Foreign Exchange Management Act (FEMA)

• Companies Act, 2013

• Income Tax Act, 1961 (if applicable)

• Other sector-specific laws depending on the nature of operations.

Failure to comply can lead to penalties, operational restrictions, or even revocation of registration. This guide outlines the necessary RBI compliances for BOs, LOs, and POs in India.

2. Forms of Foreign Entities in India

2.1 Branch Office (BO)

A Branch Office (BO) is an extension of a foreign company engaged in permissible commercial activities such as:

• Export/import of goods

• Professional consultancy services

• Research and development

• Technical collaboration with Indian companies

• Representing the parent company in India

However, BOs are restricted from engaging in retail trading or direct manufacturing.

2.2 Liaison Office (LO)

A Liaison Office (LO) acts as a communication channel between the parent company and Indian businesses. It cannot undertake any commercial activity. Permitted activities include:

• Representing the foreign company

• Promoting business interests in India

• Acting as a communication bridge

• Market research and feasibility studies

LOs are not allowed to generate revenue and must maintain all expenses via remittances from their parent company.

2.3 Project Office (PO)

A Project Office (PO) is set up for executing specific projects in India. It is temporary and established only when:

• The project is funded by foreign direct investment (FDI).

• The project is executed under a contract with an Indian company.

• It is approved by an Indian authority or involves bilateral/multilateral financing.

POs can only engage in activities related to the project and must close once the project is completed.

3. RBI Compliance Requirements for BO, LO, and PO

3.1 Approval Process & Setup

• Foreign entities must obtain RBI approval through an Authorized Dealer (AD) Category-I Bank.

• The approved entity must register with the Registrar of Companies (RoC) within 30 days.

• If a BO/LO/PO is not set up within 6 months, the approval lapses. A one-time extension of 6 months can be granted by the AD Bank. Further extensions require RBI approval.

3.2 Banking and Fund Management

EntityType of Bank AccountConditions
LOOne bank accountRequires RBI approval for additional accounts
BOCan open multiple accountsOperates on self-sustaining revenue
POForeign currency accountOnly for project-related expenses

3.3 Annual Filings & Compliance

Compliance RequirementBOLOPODue Date
Annual Activity Certificate (AAC)RequiredRequiredRequiredBy 30th September
Filing with AD BankRequiredRequiredRequiredWithin 6 months of financial year-end
Filing with RBI (if multiple offices exist)RequiredRequiredNot applicableAnnual basis
Tax Filings (if applicable)RequiredNot applicableRequiredPer tax calendar

AAC Submission:

o BO/LO: Submitted to AD Bank & Director General of Income Tax (International Taxation) in New Delhi.

o PO: Submitted only to AD Bank.

Verification by AD Bank:

o AD Bank must review the AAC and ensure compliance with RBI approval conditions.

o Any adverse findings must be reported to RBI’s General Manager.

3.4 Other Regulatory Approvals

EventApproval RequiredRemarks
Shifting to another cityYesRequires prior approval from AD Bank
Shifting within the same cityNoOnly intimation to AD Bank needed
Establishing more than 4 officesYesJustification required
Remittance of profit outside IndiaYesNeeds audited financials and CA certificate

Profit Remittance for BO/PO:

o Audited Balance Sheet & Profit & Loss Account.

o CA Certificate ensuring the remittance includes only profits from permitted activities.

o Tax payment proof before remitting funds abroad.

3.5 Closure of BO, LO, or PO

Entities wishing to close operations must:

a. Obtain RBI & AD Bank approval.

b. Settle outstanding liabilities.

c. Submit No Objection Certificate (NOC) from tax authorities.

d. Remit remaining funds abroad (if applicable).

e. File closure documents with the MCA & RBI.

4. Importance of Timely Compliance

• Avoidance of penalties & fines: Non-compliance can lead to monetary penalties & restrictions on operations.

• Smooth remittances & financial transactions: Proper compliance ensures hassle-free repatriation of profits.

• Enhanced credibility: Regulatory compliance improves business reputation & credibility in India.

5. How ReturnFilings.Com Can Help

At ReturnFilings.Com, we specialize in: ✔ Advisory on RBI approvals & registration processes

✔ Seamless filings of AAC, tax, and regulatory forms

✔ Monitoring compliance deadlines

✔ Handling RBI & MCA communication

Our experts ensure that your foreign entity operates smoothly, legally, and efficiently in India.

By adhering to the above compliance requirements, avoid penalties, and maintain good legal standing. For professional assistance, reach out to us on email: info@returnfilings.com or on whatsapp: https://wa.me/919910123091 to ensure all statutory obligations are met on time.

frequently asked questions (faq's) related to RBI Compliance for Foreign Entities in India (BO, LO, PO)

Q What are the different types of presence a foreign entity can have in India?+

Q What is the primary regulatory authority governing foreign entities in India?+

Q Why is RBI compliance important for foreign entities?+

Q What are the general RBI compliance requirements for foreign entities?+

Q What activities can a Branch Office undertake in India?+

Q What are the key RBI compliance requirements for a BO?+

Q Can a BO repatriate profits to its parent company?+

Q What activities can a Liaison Office undertake in India?+

Q What are the key RBI compliance requirements for an LO?+

Q Can an LO receive income in India?+

Q What activities can a Project Office undertake in India?+

Q What are the key RBI compliance requirements for a PO?+

Q How long can a PO operate in India?+

Q What are the reporting requirements for foreign entities in India?+

Q What is Form FCGPR?+

Q What are the KYC/AML requirements for foreign entities in India?+

Q Can a foreign entity have multiple offices in India?+

Q What are the tax implications for foreign entities operating in India?+

Q What happens if a foreign entity violates RBI regulations?+

Q What are the regulations regarding downstream investment by foreign entities in India?+

Q What are the rules related to the transfer of shares of an Indian company from a resident to a non-resident?+

Q What are the regulations for foreign investment in startups in India?+

Q What are the latest changes in RBI regulations related to foreign entities in India?+

Q What are the common challenges faced by foreign entities in complying with RBI regulations?+

Q What are the typical documents required for setting up a Liaison Office in India?+

Q What are the documents required for filing Form FCGPR?+

Q How can I ensure timely compliance with RBI regulations?+

Q What are the regulations for External Commercial Borrowings (ECB) by Indian companies?+

Q How do I open a bank account for my Liaison Office in India?+

Q What are the regulations related to the appointment of directors for a Branch Office in India?+

Q How can I repatriate funds from my Project Office after project completion?+

Q What are the tax implications for a foreign company having a Liaison Office in India?+

Q How do I renew the registration of my Liaison Office with the RBI?+

Q What are the regulations for the closure of a Branch Office in India?+

Q Can a foreign entity invest in an Indian company through the automatic route?+

Q What are the regulations for foreign portfolio investment in India?+

Q Where can I find the contact details of the RBI officials dealing with foreign entity compliance?+