How to Set up Project Office in India?
- The foreign company who wants to execute e project in India and that they will have a presence for limited period of your time .
- Generally foreign companies engaged in turnkey construction or installation found out a project office in India
Foreign entities who are rewarded a contract to execute a infrastructure or installation project in India, execute the project, through project offices duly registered with the Federal Reserve Bank of India (RBI) and therefore the Registrar of Companies (ROC).
The difference between project office and liason office is that project office can undertake commercial activities associated with the project awarded whereas a liason office cannot undertake any business activity
Revised Regulations 2016 under FEMA has delegated all powers of approving applications to AD banks except few cases.
In this article, we might discuss various aspects and procedure for fixing project office in India as per revised guidelines.
A foreign company can incorporate a project office in India only it’s secured a contract to execute a project in India from a Indian Company and
The project is funded directly by inward remittance from abroad
- The project had been approved by appropriate authority
- The project is funded by international financial organization
- a corporation awarding the contract has been granted loan from public financial organization or bank in India
- RBI has given general permission for opening of Project Office in India if the above conditions are satisfied. However, if any entity resident in Pakistan, Bangladesh, Sri Lanka, Iran, Afghanistan, China, Macau and Hong-Kong desires to open project office in Jammu & Kashmir, North Eastern States and Andaman and Nicobar islands, approval is granted by RBI in consultation with Government of India. altogether other cases, Authorized Dealer Category-I banks are empowered to grant approval.
- Principal business falls in defence/telecom/private security/ information and broadcasting sector. However, no separate reference or approval of the govt of India (GoI) are going to be required in respect of proposal for opening of a PO concerning the defence sector, if contract that the PO is opened has been awarded by/entered into with the Ministry of Defence or Service Headquarters or Defence Public Sector Undertakings;
Time Limit for Opening a Project Office
- The office shall be opened within 6 months from the date of approval letter.
- Extension for six months could also be granted by AD Category-I bank for reasons beyond the control of the person resident outside India.
- Further extension could also be granted by RBI only
- It takes generally takes 15 days to register a PO
What is the knowledge required in form FNC
The application has got to be made in Form FNC. It’s an easy form and in mentioned below:
What are the documents required along with the application for Project office
1. Copy of the Certificate of Incorporation / Registration attested by the Notary Public in the country of registration[If the original Certificate is in a language other than in English, the same may be translated into English and notarized as above and cross verified/attested by the Indian Embassy/ Consulate in the home country].
2. Latest Audited Balance sheet of the applicant company.[If the applicants’ home country laws/regulations do not insist on auditing of accounts, an Account Statement certified by a Certified Public Accountant (CPA) or any Registered Accounts Practitioner by any name, clearly showing the net worth may be submitted]
3. Bankers’ Report from the applicant’s banker in the host country / country of registration showing the number of years the applicant has had banking relations with that bank.
Validity of PO
The PO remains valid for the whole tenure of the project (till the project is completed or wound up).
Important points to be noted
- Proprietary concerns which are established abroad aren’t allowed to start out a project office in India.
- A far off entity’s project office is allowed for the acquisition of any property for completing activities which are permitted by Federal Reserve Bank of India or for his or her own use.
- Only non-interest bearing current accounts are often maintained by a project office in India.
- Registrar of Companies must be intimated about opening of Project office in India within the prescribed form to with all important documents within the time specified.
Foreign Currency Accounts by PO
POs can open non-interest bearing foreign currency accounts with AD Category – I banks subject to the following:
- The PO has been established in India as per the applicable regulations.
- The contract governing the project specifically provides for payment in foreign currency.
- Each PO can open 2 foreign currency accounts, usually one denominated in USD and therefore the other in home currency of the project awardee but both shall be maintained with an equivalent AD Category–I bank.
- They will be used just for payment of project related expenses and receiving foreign currency from the Project Sanctioning Authority and remittances from parent/group company abroad or bilateral / multilateral international financing agencies.
- The responsibility of ensuring that only the approved debits and credits are allowed within the Foreign Currency Account shall rest solely with the branch concerned of the AD. Further, the Accounts shall be subjected to 100 per cent scrutiny by the Concurrent Auditor of the respective AD banks.
- The foreign currency accounts need to be closed at the completion of the project.
Remittance of Profit or Surplus
PO is permitted to remit outside India profit of the project net of applicable Indian taxes.
However, authorized Dealer Category – I bank may permit intermittent remittances by project offices pending completing / completion of the project subject to submission of certain prescribed documents as below:
a. The Project Office submits an Auditors’ / Chartered Accountants’ Certificate to the effect that sufficient provisions are made to satisfy the liabilities in India including tax , etc.
b. An undertaking from the Project Office that the remittance won’t , in any way, affect the completion of the Project in India which any shortfall of funds for meeting any liability in India are going to be met by inward remittance from abroad.
Inter-Project transfer of funds requires prior permission of the Regional Office concerned of the Federal Reserve Bank under whose jurisdiction the Project Office is situated.
Filing Annual Activity Certificate
Under Regulation 2016, a selected clause in respect of filing of AAC by PO has been included. The Annual Activity Certificate (AAC) in Form FNC (Annex D) shall be submitted to the designated AD Category –I Bank by the following:
- just in case of a sole PO, by the PO concerned.
- just in case of multiple POs, a combined AAC in respect of all the offices in India by the nodal office of the POs.
This AAC is to be obtained from a accountant showing the Project Status and certifying that the accounts of the Project Office has been audited and therefore the activities undertaken are in conformity with the overall / Specific permission given by the Federal Reserve Bank .
Time Limit for Filing AAC
- Where fiscal year ends on 31stMarch: Within 30th September of that year
- Where fiscal year ends on another date: Within 6 months from the top of the fiscal year
MCA Compliance Filing
Every Foreign company is required to submit below documents to the Registrar of Companies for registration, within 30 days of the permission of RBI/AD Bank:
1. Certified copy of the charter, statutes or memorandum and articles, of the corporate or other instrument constituting or defining the constitution of the corporate and, if the instrument isn’t within the English , a licensed translation thereof within the English language;
2. Full address of the registered or principal office of the corporate
3. List of the administrators and secretary of the corporate containing such particulars as prescribed under Rule 3.
4. Name and address or the names and addresses of 1 or more persons resident in India authorized to simply accept on behalf of the corporate service of process and any notices or other documents required to be served on the corporate
5. Full address of the office of the corporate in India which is deemed to be its principal place of business in India
6. Particulars of opening and shutting of an area of business in India on earlier occasion or occasions
7. Declaration that none of the administrators of the corporate or the authorized representative in India has ever been convicted or debarred from formation of companies and management in India or abroad.
8. Other Documents as could also be prescribed.
Rule 3(3) of the businesses (Registration of Foreign Companies) Rules, 2014 requires application in eForm FC-1 to be supported with an attested copy of approval from the Federal Reserve Bank of India/AD Bank under exchange Management Act and therefore the rules and regulations thereunder or a declaration from the authorized representative of such Foreign Company that no such approval is required.
And Rule 3(4) provides that just in case of any alteration within the aforesaid documents the Foreign Company is required to submit a return in eForm FC-2 containing the particulars of alteration as per the prescribed format with the Registrar of Companies, within 30 days of any such alteration.
India is one among the fastest growing economy within the world. the govt is making all the efforts to form it one among the simplest places for doing business. the newest RBI guidelines regarding establishment of Project Office are issued with the aim to facilitate ease in doing business in India and liberalizes the procedure for non-residents to line up an area of business in India by delegating several powers of the RBI to AD Bank. It, thereby, makes the whole process time efficient also as more transparent.