Liaison Office in India – A Gateway for Foreign Companies

India has emerged as one of the fastest-growing economies in the world, making it an attractive destination for foreign businesses seeking to explore new opportunities. For companies that want to establish their presence in India without engaging in direct commercial activities, setting up a Liaison Office (LO) is often the first step. At K.B. Chandna & Co. (KBC), one of the oldest Chartered Accountant firms in New Delhi, we assist multinational corporations in setting up and managing their Liaison Offices with complete regulatory compliance.

What is a Liaison Office?

A Liaison Office (LO) is a representative office established by a foreign company in India. It acts as a communication channel between the head office abroad and stakeholders in India. Importantly, a liaison office cannot engage in any profit-making activity. Instead, it facilitates business development and market research, helping foreign companies understand the Indian business environment before making larger investments.

Permitted Activities of a Liaison Office

As per the Reserve Bank of India (RBI) guidelines, a Liaison Office in India can:

• Represent the parent company in India.
• Promote import and export relations between India and the home country.
• Facilitate technical and financial collaborations.
• Act as a channel of communication between Indian companies and the parent company.
• Promote the business interests of the parent company without undertaking commercial transactions.

Restrictions on a Liaison Office

While liaison offices are useful, they have strict limitations:

• No direct business activities – A Liaison Office cannot earn revenue in India.
• No commercial transactions – It cannot sell goods or services.
• Funding restrictions – All expenses must be met through foreign remittances from the parent company.

Eligibility to Open a Liaison Office

A foreign company can set up a liaison office in India if it:

• Has a profit-making track record for the previous three financial years.
• Has a net worth of at least USD 50,000 or equivalent.

Approval and Registration Process

Setting up a Liaison Office in India requires approval from the Reserve Bank of India (RBI) and registration with the Registrar of Companies (RoC). The process typically involves:

1. Application to RBI – Through the Authorized Dealer Bank.
2. Submission of Documents – Including the certificate of incorporation, audited financial statements, and details of the parent company.
3. Approval from RBI – Once verified, RBI grants permission to establish the office.
4. Registration with RoC – The Liaison Office must also register under the Companies Act, 2013.
5. Other Registrations – Including PAN, TAN, and compliance with local labor laws if staff is employed.

Compliance Requirements

A Liaison Office in India is required to follow strict compliance, including:

• Filing of Annual Activity Certificate (AAC) with RBI.
• Annual filings with Registrar of Companies.
• Maintenance of proper books of accounts.
• Compliance with FEMA, Income Tax Act, and labor regulations.

Benefits of Setting up a Liaison Office

• Low-risk entry into India – Ideal for companies testing the Indian market.
• Market research – Helps in understanding consumer behavior and industry trends.
• Brand visibility – Builds reputation without heavy investments.
• Networking – Facilitates relationships with Indian stakeholders, partners, and government authorities.

How K.B. Chandna & Co. (KBC) Can Help

At K.B. Chandna & Co., we specialize in helping foreign companies establish and manage their liaison offices in India. Our services include:

• Advisory on RBI guidelines and eligibility.
• End-to-end assistance in application and approval from RBI.
• Registration with RoC and tax authorities.
• Bookkeeping, audit, and compliance support.
• Advisory on conversion of Liaison Office into a Branch Office, Project Office, or Subsidiary when the business grows.

Conclusion

A Liaison Office serves as the first step for foreign companies entering India, enabling them to study the market, build connections, and create a brand presence without engaging in full-fledged business operations. With over six decades of experience, K.B. Chandna & Co. (KBC) offers expert guidance to ensure smooth establishment and compliance of liaison offices in India.

Contact us today to learn how we can help your company set up a Liaison Office in India with complete regulatory support.