WHAT IS PROJECT OFFICE: A Project Office (PO) means a place of business established to represent the interests of a foreign company executing a project in India. Such offices are prohibited from undertaking or carrying on any activity other than the activity relating to the execution of the project for which such office is established.
A foreign company can open a project office in India for a particular project with the approval of RBI and ROC and can close the project office after the completion of the project.
The registration process for Project office registration is executed as per the guidelines mentioned under section 6(6) of the Foreign Exchange Management Act 1999.
GENERAL PERMISSION:
Reserve Bank has granted general permission to foreign companies to establish POs in India, provided they have secured a contract from an Indian company to execute a project in India, and
- the project is funded directly by inward remittance from abroad; or
- the project is funded by a bilateral or multilateral International Financing Agency; or
- the project has been cleared by an appropriate authority; or
- a company or entity in India awarding the contract has been granted Term Loan by a PFI or a Bank in India for the project.
However, if the above criteria’s are not met, the foreign entity has to approach the RBI, Central Office, for approval.
Setting up of Project Offices by foreign Non-Government Organisations/Non-Profit Organisations/Foreign Government Bodies/Departments, by whatever name called, are under the Government Route. Accordingly, such entities are required to apply to the Reserve Bank for prior permission to establish an office in India, whether Project Office or otherwise. [as amended vide AP (DIR) No.31 dated September 17, 2012]
DOCUMENTS REQUIRED FOR REGISTRATION OF PROJECT OFFICE IN INDIA
Documents submitted to the RBI
- Certificate of Incorporation
- Memorandum of Association & Article of Association attested by Indian Embassy/Notary Public in the Country of Registration.
- Current Audited Balance sheet of the applicant company.
- A resolution by the foreign company’s Board stating the intention behind establishing the project office in India.
- Documentary proof that the Project Office is financially backed by the bilateral or multilateral International Financing Agencies OR the Indian Company has obtained term loan for the Project Office by the Financing Institution or Bank in India.
- Banker’s report submitted by the company’s banker stating the company’s relationship with the bank.
- A letter of authority issued by the parent company in regard to the local representative
- Complete details of activities conducted in the project office in India
- Residence Proof of the authorized personnel
- Copy of passport of the authorized personnel
- A letter saying that the company will open a bank account in India
Documents Submitted to the ROC
- Permission from RBI to set up a project office in India
- MOA and AOA of the Foreign Company
- Notarized copy of COI
- A notarized copy of a power of attorney mentioning the name of the person residing in India and making him responsible for accepting any notice or document on behalf of the company
- A complete details of Directors of the Company
- Complete KYC of the shareholders holding more than 10% of Equity in the Applicant Company
PROCEDURE FOR REGISTRATION OF PROJECT OFFICE IN INDIA
1. A person resident outside India desiring to establish a project office in India shall submit an application in Form FNC to an Authorised Dealer Category-I bank
2. The bank may, subject to the provisions of Regulation 5, grant approval as per the directions and/or guidelines issued by the Reserve Bank in this regard.
3. In case no office is opened by the person resident outside India within six months from the date of the approval letter, the approval for establishing the office in India shall be cancelled.
4. In cases where the person resident outside India is not able to open the office within the stipulated time frame due to reasons beyond their control, the Authorised Dealer Category-I bank may consider granting an extension of time for setting up the office by a further period of six months.
5. Any further extension of time shall require the prior approval of the Reserve Bank in this regard.
Registration Of Project Office Of Foreign Company With The ROC
Once the approval is received from RBI for the establishment of the Project Office in India, an application is filed for project office registration of the foreign company within 30 days of such approval. DIN is required in case any Indian director and the digital signature are needed of the authorized signatory for e-filing statutory forms with the ROC.
PAN Card, Tax Deduction Number, And Bank Account Opening
The income tax department of India issues a unique 10 digit number, known as PAN number. Once the PAN number is obtained, the branch office is eligible to open its bank account. And it is necessary for every taxpayer to obtain a Tax Deduction Account Number to obey all the TDS norms.
Other Registration And Licenses
Once the Project Office comes inactive state, there are different activities related to compliance that rely on the business genre and the state-specific laws applicable to all the entities indulging in the commercial activities. For example, Goods and Services Tax (GST), Professional Tax Act, Provident Funds Act, and Employee State Insurance Act (ESIC).
REPORTING REQUIREMENTS AFTER THE ESTABLISHMENT OF THE PO:
(i) All new entities setting up Project Offices shall submit a report containing information, as per the format provided in Annex 3 within five working days of the PO becoming functional to the Director General of Police (DGP) of the state concerned in which PO has established its office; if there is more than one office of such a foreign entity, in such cases to each of the DGP concerned of the state where it has established an office in India; [as amended vide AP(DIR) No.35 dated September 25, 2012]
(ii) The foreign company establishing a Project Office in India is to furnish report through the concerned AD branch, to the concerned Regional Office of Reserve Bank of India under whose jurisdiction the Project Office is set up, incorporating the following details.
1. Name and address of the Foreign Company,
2. Reference Number and date of letter awarding the contract referred to in clause (ii) of Regulation 5 of Notification No. FEMA 22/2000-RB dated May 3, 2000,
3. Particulars of the authority awarding the projects / contract,
4. The total amount of contract,
5. Address / e-mail address / telephone number / fax number of the Project Office,
6. Tenure of Project Office,
7. Brief details of the Project undertaken,
8. AD branch with whom the account has been opened and the foreign currency in which the account is opened,
9. An undertaking to the effect that the Project Office is eligible to avail of the General Permission under Regulation 5(ii) to RBI Notification No.22/2000 – RB dated May 3, 2000read with Notification No. FEMA 95 dated July 2, 2003 showing the reason thereof.
10. This Report shall be forwarded through the AD branch to the Regional Office concerned of the Reserve Bank of India within 2 months of establishment of the Project Office.
(iii) The Project Office shall also submit to the AD branch on an annual basis, a Certificate from a Chartered Accountant showing the Project Status and certifying that the accounts of the Project Office has been audited and the activities undertaken are in conformity with the General / Specific permission given by the Reserve Bank.
Additional Reporting Requirements: A copy of the report in Annex 3 shall be filed with the DGP concerned on annual basis along with a copy of the annual certificate, and also with the AD concerned. [as amended vide AP (DIR) No.35 dated September 25, 2012
NOTE:
OTHER GENERAL CONDITIONS APPLICABLE TO PROJECT OFFICES OF FOREIGN ENTITIES IN INDIA
(i) Without prior permission of the Reserve Bank, no person being a citizen of / registered in Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, 2Hong Kong or Macau can establish in India, a Branch or a Liaison Office or a Project Office or any other place of business.
(ii) Entities from Nepal are not allowed to establish any Project Offices in India.
(iii) Project Offices of a foreign entity are permitted to acquire immovable property by way of purchase for their own use and to carry out permitted/incidental activities. However, entities from Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, Hong Kong, Macau, Nepal, Bhutan or China are not allowed to acquire immovable property in India for a Project Office without prior RBI approval.
Project Offices including Liaison Offices, have general permission to carry out permitted / incidental activities from lease property subject to lease period not exceeding five years.
(iv) Project Offices are allowed to open non-interest bearing INR current accounts in India. Such Offices are required to approach their Authorised Dealers for opening the accounts.
(v) 3Powers relating to transfer of assets of Liaison / Branch Office/Project Office have been delegated to AD Category-1 Banks subject to compliance with the following stipulations:
1. Such proposals will be considered only from LO/BOs who are adhering to the operational guidelines stipulated in AP DIR Circular No.23& 24 of December 30, 2009 such as (i) submission of AACs (up to the current financial year) at regular annual intervals with copies endorsed to DGIT (International Taxation) and (ii) obtained PAN from IT Authorities and have got registered with ROC under Companies Act 1956, if necessary. Similarly, proposals from POs should conform to the guidelines issued in AP DIR Cir.No.44 dated May 17, 2005 with regard to initial reporting requirements (para.2.3) and submission of CA certified annual report indicating project status (para.2.4).
2. A certificate is to be submitted from the Statutory Auditor furnishing details of assets to be transferred indicating their date of acquisition, original price, depreciation till date, present book value or WDV value and sale consideration to be obtained. Statutory Auditor should also confirm that the assets were not re-valued after their initial acquisition. The sale consideration should not be more than the book value in each case.
3. The assets should have been acquired by the LO/BO/PO from inward remittances and no intangible assets such as goodwill, pre-operative expenses should be included. No revenue expenses such as leasehold improvements incurred by LO/BOs can be capitalised and transferred to JV/WOS.
4. AD bank to ensure payment of all applicable taxes while permitting transfer of assets.
5. Transfer of assets to be allowed by AD banks only when the foreign entity intends to close their LO/BO/PO operations in India.
6. Credits to the bank accounts of LO/BO/PO on account of such transfer of assets will be treated as permissible credits.
Format of Report to DG of Police
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