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 abroad through normal banking channels. 

The Liaison Office is permitted to undertake only the following activities:
Representing in India the parent Company / group Companies Promoting export/ import from/ to India
Promoting technical / financial collaborations between the parent / group companies and companies in India
Acting as a communication channel between the parent company and Indian companies
Any foreign company intending to open a Liaison Office in India is required to obtain prior approval from the Reserve Bank of India (RBI).
The foreign company is also required to obtain a Certificate of establishment of place of business in India from the Registrar of Companies (ROC).
The Liaison Office cannot undertake any business activity in India nor earn any income in India.
The Liaison Office has to meet its entire expenses from funds received from the parent company through normal banking channels. At the time of closure of the Liaison Office, the RBI grants permission to repatriate 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 to comply with the requisite tax withholding requirements under the domestic tax law.
However, the office must file regular returns to the RBI and ROC. Such returns must include Audited Annual accounts and an activity report for the year.



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