RBI Compliance for Foreign Entities
Foreign Entities which incorporated in India and having a Branch Office or Liaison Office or Project Office in India need to comply with various provisions of FEMA and RBI Act. These RBI compliance include Reporting on FIRMS Portal, FLA Return and adherence to various RBI Guidelines.
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Foreign entities in India are incorporated in 3 forms:
- Branch office in India (BO)
- Liaison office in India (LO)
- Project office in India (PO)
All the above forms of foreign entities in India primarily need to comply with the RBI Act, Companies Act, FEMA Act and any other act as applicable in accordance with the nature of business, shape and size of the organization.
Various RBI Compliance need to be complying by the BO/ LO / PO is:
- After getting approval from RBI for setting up BO/ LO/ PO, they shall inform to the AD Category I Bank regarding date of set-up, AS Category-I Bank shall in turn inform the RBI for the same.
- If BO/ LO/ PO office are not set-up within six months from getting approval, the approval shall lapse, however if there are certain reason beyond control, AD Category I Bank may consider granting of extension for another six months. Any further extension need prior approval of RBI.
- Every Liaison Office (LO) can open one bank account with any AD Category I Bank, for opening any other bank account, prior approval of RBI is required. Every Branch office (BO) can open account with any AD Category I Bank. Every Project office (PO) can open non-interest bearing foreign currency account with any AD Category – I Bank.
- Every BO/LO/PO shall submit Annual Activity Certificate (AAC) as at the end of 31st March every year. In case of multiple BO/LO, combined AAC shall be submitted. For BO/LO, AAC shall be submitted to AD Category I Bank with a copy to Director General of Income Tax (International Taxation) New Delhi. In case of PO, AAC required to be submitted to AD Category –I Bank only.
AD Category-I Bank shall scrutinize the AAC submitted along with auditor comments thereon and ensure the activities undertaken are as per approval given. In case of any adverse finding in any RBI Compliance, same shall be reported by AD Category I Bank to the General Manager, Reserve Bank of India, CO Cell, New Delhi.
- In case of BO/LO if number of offices exceed 4 (i.e. one in each zone, East, West, North and South) the applicant has to justify the need for additional office and the same shall require prior approval from RBI. The application shall be made in Form FNC and the same shall be routed through AD Category I Bank.
In case of shifting from one place to another city in India prior approval of AD Category I Bank is required. No approval is required if shifting within city, provided intimation is sent to AD Category I Bank.
- In case of remittance of profit net of taxes, the same shall be routed through AD Category I Bank supported by following documents:
- Certified copy of Audited Balance Sheet and profit & Loss Account
- Certificate from Chartered Accountant certifying the manner of arriving at the remittable profit and that the entire profit has been earned by the undertaken from the permitted activities only and the profit does not include any profit on revaluation of assets.
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