COMPARISON BETWEEN LIAISON OFFICE, BRANCH OFFICE AND PROJECT OFFICE
| Particulars | Liaison Office | Branch Office | Project Office |
| Meaning | A place of business to act as a channel of communication between the Principal place of business or Head Office by whatever name called and entities in India but which does not undertake any commercial / trading / industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal banking channel | Branch Office in relation to a company, means any establishment described as such by the company | Project Office’ means a place of business in India to represent the interests of the foreign company executing a project in India but excludes a Liaison Office. |
| Purpose | It can only take up liaison activities in India and can act as a channel for communication between its head office abroad and Indian parties. It cannot undertake any commercial activities in India. Therefore, when purpose of foreign company is to do water testing in India without indulging in full-fledged commercial activity, it opts for Liaison office registration in India | Foreign companies engaged in manufacturing and trading activities abroad are allowed BranchOffice registration in India. Therefore, when the purpose of foreign company is to do engage in manufacturing and trading activities in India, it opts for Branch office registration in India | Project offices are generally established to carry out a particular activity of a specific project under the instructions and guidance of the foreign parent company. |
| Legal Status | Liaison office do not have any separate legal entity. It is considered as Foreign Company in India. | Branch office do not have any separate legal entity. It is considered as Foreign Company in India. | Project office do not have any separate legal entity. It is considered as Foreign Company in India. |
| Permitted Activities | · Representing the parent company / group companies in India. · Promoting export / import from / to India. · Promoting technical/ financial collaborations between parent / group companies and companies in India. · Acting as a communication channel between the parent company and Indian companies. |
· Export/import of goods. · Rendering professional or consultancy services. · Carrying out research work in which the parent company is engaged. · Promoting technical or financial collaborations between Indian companies and parent or overseas group company. · Representing the parent company in India and acting as buying/ selling agent in India. · Rendering services in Information Technology and development of software in India. · Rendering technical support to the products supplied by parent/group companies. Representing a foreign airline/shipping company. |
Reserve Bank has granted general permission to foreign companies to establish Project Offices in India, provided they have secured a contract from an Indian company to execute a project in India. |
| Eligibility Criteria | · Parent Company shall have a profitable track record during immediately preceding 3 years. · The Net Worth of parent company shall be not less than USD 50,000/ or its equivalent |
· Parent Company shall have a profitable track record during immediately preceding 5 years. · The Net Worth of parent company shall be not less than USD 1,00,000/ or its equivalent. |
· the project shall be funded directly by inward remittance from abroad; or · funded by a bilateral or multilateral International Financing Agency or · cleared by an appropriate authority or · A company or entity in India awarding the contract has been granted Term Loan by a bank in India or a Public Financial Institution for the project. |
| Prior Approval | Reserve Bank of India | Reserve Bank of India | Reserve Bank of India |
| Validity of approval | 3 years | 2-3 years | Until completion of project |
| Permitted Incomes | The entire expenses of LO will be met from the funds received from head office through normal banking channels. | The entire expenses of BO will be met either from the funds received from head office through normal banking channels or income generated in India. | The entire expenses of PO will be met from the funds received from head office through normal banking channels. |
| Remittance of Profit to Parent Company | Remittance of profit required only in case of closure of LO. | Profits can be repatriated/transferred to parent company subject to applicable taxes in India. | Profits can be repatriated/transferred to parent company subject to applicable taxes in India. |
| Taxability | No Income Tax as there is no income. Where an LO becomes a Permanent Establishment in India, it will be taxed as a foreign entity at the rate of 40%. |
BO is treated and taxed as foreign company | PO is treated and taxed as foreign company |
| Closure of Entity | LO need not go through winding up process for closure. It only needs to file Closure application with the RBI | A BO need not go through winding up process for closure. It only needs to file Closure application with the RBI | A PO need not go through winding up process for closure. It only needs to file Closure application with the RBI |
| Advantages | 1. Not a separate legal entity hence cost of compliance is less. 2. Ideal if no income accrual in India. 3. Easy to shut down. |
1. Not a separate legal entity hence cost of compliance is less. 2. Easy repatriation of funds. 3. No Tax on dividends; 4. Easy to shut down. |
1. Not a separate legal entity hence cost of compliance is less. 2. Easy repatriation of funds. 3. No Tax on dividends; 4. Easy to shut down. |
| Borrowing | Not allowed | Not allowed unless the prior approval of RBI is taken | Not allowed unless the prior approval of RBI is taken |
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