Comparative Summary
Particulars Representative / Liasion Office Branch Office Project office Subsidy / joint venture
1.Setting - up requirements Prior approval of RBI. Prior approval of RBI. Prior approval not required if certain conditions are fulfilled. If activities / sectors falls under Automatic Route, no prior approval but only post facto filings with the RBI is obligated. Otherwise obtain Government/ FIPB approval and then comply with post facto filings.
2. Permitted activities Only liaison /representation / communication role is permitted. No commercial or business activities or otherwise giving rise to any business income can be undertaken. Activities listed / permitted by RBI can only be undertaken.Local manufacturing and retail trading is not permitted. Permitted if the foreign company has a secured contract from an Indian company to execute a project in India. Any activity specified in the memorandum of association of the company. Wide range of activities permissible subject to FDI guidelines / framework.
3. Funding for local Operations Local expenses can be met only out of inward remittances received from abroad from Head Office through normal banking channels. Local expenses can be met through inward remittances from Head Office or from earnings from permitted operations. Local expenses can be met through inward remittances from Head Office or from earnings from permitted operations. Funding may be through equity or other forms of permitted capital infusion or borrowings (local as well as overseas per prescribed norms) or internal accruals.
4. Limitation of liability Unlimited liability in India within overall liability obligation of Foreign Company. Unlimited liability in India within overall liability obligation of Foreign Company. Unlimited liability in India within overall liability obligation of Foreign Company. Liability limited to the extent of equity participation in the Indian Company.
5. Compliance requirements under Companies Act Requires registration and periodical filing of accounts / other documents. Requires registration and periodical filing of accounts / other documents. Requires registration and periodical filing of accounts / other documents. Required to comply with substantial higher statutory compliance and filings requirements. As compared to LO / BO
6. Compliance Requirements under Foreign Exchange Management Regulations Required to file an Annual ComplianceCertificate from the Auditors in India with the RBI. Required to file an Annual Activity / Compliance Certificate from the Auditors in India with the RBI. Compliance certificates stipulated for various purposes. Required to file Periodic and Annual filings relating to receipt of capital and issue of shares to foreign investors.
7. Compliance Requirements under Income Tax Act No tax liability as generally it cannot / does not carry out any commercial or income earning activities. May be advisable to file an Income-tax return. May be liable to Fringe Benefit Tax (FBT) and obliged to file FBT Return annually if it has employee base in India.The FBT levy is proposed to be abolished from Financial year 2009-10. The company is obliged to pay tax on income earned and required to file return of income in India. No further tax on repatriation of profits which are permissible in both cases. Liable to FBT and obliged to file FBT Return annually if it has employee base in India. The FBT levy is proposed to beabolished from Financial year 2009-10. The company is obliged to pay tax on income earned and required to file return of income in India. No further tax on repatriation of profits which are permissible in both cases. Liable to FBT and obliged to file FBT Return annually if it has employee base in India. The FBT levy is proposed to be abolished from Financial year 2009-10. Liable to tax on global income on net basis. Dividend declared is freely remittable but subject to distribution tax of 16.995 percent on Dividends declared / distributed / paid pursuant to which dividend is tax free for all shareholders limited inter-corporate dividend set-off apply. Liable to FBT and obliged to file FBT Return annually pursuant to employee base in India. The FBT levy is proposed to be abolished from Financial year 2009-10.
8. Permanent Establishment(PE) LO generally do not constitute PE / taxable presence under Double Taxation Avoidance Agreements (DTAA) due to limited scope of activities in India. Generally constitute a Permanent Establishment (PE) and are a taxable presence under DTAA as well domestic income-tax provisions. Generally constitute a Permanent Establishment (PE) and are a taxable presence under DTAA as well domestic income-tax provisions. It is an independent taxable entity and does not constitute a PE of the Foreign Company per se unless deeming provisions of the DTAA are attracted.