Liasion Office

Registration of A Liaison Office

A Liaison Office could be established with the approval of the government of India. The role of Liaison Office is limited to collection of information, promotion of exports/imports and to facilitate technical/financial collaborations. Liaison office cannot undertake any commercial activity directly or indirectly.

Liaison Office Formation:

A Liaison Office is in the nature of a representative office set up primarily to explore and understand the business and investment climate. A Liaison Office is not permitted to undertake any commercial / trading / industrial activity, directly or indirectly, and is required to maintain itself out of inward remittances received from parent company through normal banking channels. The Liaison Office is permitted to undertake following activities only :

Suitability of a Liaison Office

The Liaison Office generally acts as a communication channel between the parent company overseas and its present or prospective customers in India. The Liaison Office can also be set up to establish business contacts or gather market intelligence to promote the products or services of the overseas parent company. The Liaison Office cannot undertake any business activity in India nor earn any income in India.

At the time of closure of the Liaison Office, RBI grants permission to repatriate the balance in the Indian bank account to the parent company.

Since the Liaison Office is not permitted to earn any income, it should not constitute a taxable entity in India. However, the Liaison Office would be required to withhold tax from certain payments and hence is expected to comply with the requisite “tax withholding” obligations under the domestic tax law

To open a Liaison office, the parent company has to apply to the Reserve Bank of India and is normally granted permission within 2 to 4 weeks.

Liaison office is subjected to few restrictions; some of them that deserve to be well understood are reproduced here :