What is Liaison Office?

A Liaison Office (LO) is like a representative office in India for a foreign company. Its main purpose is to understand the Indian business environment, conduct market research for the parent company’s products, and exchange information with potential customers or vendors. It can also represent the parent or group companies in India, promote exports or imports, encourage technical or financial collaborations, and facilitate communication between the parent company and Indian businesses.

However, a liaison office can’t engage in commercial activities, and all its expenses must be covered by the parent company. If it does generate any income related to the parent company, that income will be subject to taxation under the Income Tax Act of 1961. Since a liaison office is not considered a separate legal entity from its foreign parent company, it is taxed at the same rate as foreign companies, which is currently 40% of the total income.

Application Requirements for Liaison Office Registration

1. Adequate Finances: The foreign parent company should have a net worth of at least $50,000, backed by proper financial statements.
2. Profitable Track Record: The foreign company must have shown a consistent profit in the last three financial years.
3. Matching Names: The name of the Liaison Office in India must be the same as the parent company.
4. No Business Income: The Liaison Office is not allowed to engage in any money-making activities.
5. Foreign Company Taxation: The Liaison Office is taxed in India as if it were a foreign company.

Documents Needed to Register a Liaison Office Registration

• For RBI/AD Bank Approval:
  • Filled Form FNC-1
  • Approval Certificate from RBI or AD Bank
  • Letter from the Parent Company’s Principal Officer
  • Legalized Certificates of Incorporation, MOA, and AOA
  • Letter of Comfort from the Parent Company
  • Proof of Authorization for the Indian Representative
• For ROC Registration:
  • Legalized Certificates of Incorporation, MOA, and AOA of the Parent Company
  • Notarized List of Company Directors
  • Audited Balance Sheets for the Last 3 Years
  • KYC Details of Shareholders with Over 10% Shares
  • Banker’s Report from the Parent Company’s Bank
  • Proof of Registered Office Address
  • Company Resolution for Opening an Indian Bank Account
  • Declaration from the Liaison Office on FDI Eligibility and Funding Source
  • Proof of Authorization for the Indian Representative