Establishment of Project Office in India

• Company formation / Compliances
• ||
• July 8, 2021

A Project Office (PO) is a place of business established to execute a project in India representing the interests of a foreign company. Such offices are prohibited from undertaking or carrying on any activity other than the activity relating to the execution of the project and are established to have a presence for a limited period and for executing a specific task.

• What are the eligibility criteria to establish a project office in India?
  As per general permission from RBI, a foreign company may open a project office in India provided it has   acquired from an Indian company a contract to execute a project in India and:
  • The project is funded directly either through inward remittance from abroad; or
  • Project is supported by a bilateral/ multilateral International Financing Agency (IMF/World Bank/Similar Body); or
  • The project got cleared by an appropriate authority; or

  The company in India, which has awarded the contract, has been permitted term loan by a public financial institution or bank in India for the project.

• Is any approval required for establishing a project office in India?
  Yes, RBI prior approval is required to open a project office in any of the below cases:
  • If the applicant’s principal business falls in defence, telecom, private security, and information and broadcasting.
  • If the applicant is an entity registered/incorporated in Pakistan or a citizen of Pakistan.

  Authorized Dealer Category-I banks are empowered to approve in all other cases.
  

• Is there any time limit within which project office should be established after receiving approval?
  Yes, the project office should be established within six months from the date of the approval letter. A six-month extension may be granted by AD Category-I bank for reasons beyond the control of the person outside India. Further, an extension may be given by RBI only, and it may generally take 15 days to register a project office.

• What is the application process?
  For establishing PO in India, the non-resident entity may apply Form FNC to a designated AD Category – I bank along with the prescribed documents.The AD Category-I bank after exercising due diligence regarding the applicant’s background, and satisfying itself as regards adherence to the eligibility criteria and compliance with the extant KYC norms, shall grant approval to the foreign entity for establishing a project office in India and may frame an suitable policy for trading with these applications in conformity with the FEMA regulations and directions.

• What are the post establishment compliances for the project office?
  Filing of Form FC-1 within thirty days of establishing its place of business in India (u/s 380 of CA 2013 r/w companies (Registration of Foreign Companies) rules 2014.

• Is there any annual compliance that needs to be undertaken?
  The following annual compliances need to be undertaken:

1. 1. Under FEMA and its relevant regulations
      The establishment needs to submit an Annual Activity Certificate (“AAC”) and audited financial statements with RBI.
   2. Under Companies Act, 2013
      Filing of financial statements and annual returns.

• What is the validity period of the project office?
  The validity time of the project office is for the entire tenure of the project (till the project is completed or wound up).

India is one of the fastest-expanding economies in the world. The government is making all the attempts to make it one of the best places for doing business. The RBI guidelines regarding the establishment of project office have been issued to ease in doing business in India and liberalizes the procedure for non-residents to set up a place of business in India by delegating several powers of the RBI to AD bank. It, thereby, makes the entire process time-efficient as well as more transparent.

At AJSH, we assist our clients in PO establishment and compliances, setting up their business in India and dealing with various corporate matters (Company incorporation, ROC Compliance, Company winding up), bookkeeping, tax filings & assessments, payroll, auditing, trademark registration, business structuring etc. If you have any questions or wish to know more about establishing the project office in India, kindly contact us.