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“Thinking About Expanding to India? Start with a Liaison Office”
The opportunities are massive for global companies eyeing India. But entering a new country comes with its own set of questions—how do you build a local presence without taking on too much risk? How do you explore the market before making big investments? That’s where a liaison office in India fits in. It’s not a full-fledged business operation. A liaison office lets foreign companies set up a simple, non-commercial base. It’s there to study the market, meet local partners, stay visible, and lay the groundwork for the future. You won’t be selling products, signing contracts, or issuing invoices. Instead, you’ll be building relationships, facilitating communication, and representing your company’s interests—all while staying compliant with Indian regulations.
What is a Liaison Office?
A liaison office is like your company’s representative arm in India, governed by the RBI. It is ideal for companies that want to get familiar with the Indian ecosystem before going all in. It doesn’t sell anything, it doesn’t raise bills—but it plays a vital role in supporting long-term expansion. All expenses are covered by the parent company through foreign remittance—there’s no income generated locally.
Here’s what it can do:
- Act as a communication channel between the foreign head office and Indian entities
- Promote import/export interests
- Coordinate technical or financial collaborations
- Conduct market research and brand-building activities
Benefits of a Liaison Office in India
Not every company is ready to set up a branch or register a subsidiary right away. A liaison office keeps things light, flexible, and simple, while still giving you the on-ground presence that matters.
Here are a few reasons why businesses go for this route:
Lower Risk, Lower Commitment
Establish a footprint in India without navigating taxes, revenue models, and full operations. No sales mean no local tax issues.
Clean and Simple Compliance
The rules are clear. Since you’re not doing business here, reporting and regulatory filings are limited, simplifying your admin tasks.
Build Early Trust
Meeting Indian partners in person, understanding local challenges, and being seen as “present” builds more trust than working entirely from overseas.
Cost-Efficient Setup
No minimum capital is required. Investment in infrastructure is minimal. Most costs are limited to basic office operations and staffing.
Future-Ready
Think of this like your India experiment. Once you’re confident, you can always scale to a branch or subsidiary down the line, with all your local insights in hand.
Flexible Operations
Want to scale up or shut down? You can do that without huge processes.
Eligibilities to Set Up a Liaison Office in India
Before diving into the paperwork, it’s a good idea to make sure your company meets the basic requirements. Here’s what the RBI expects from you:
- Your foreign company should have a profitable track record for the last 3 financial years
- You must have a minimum net worth of USD 50,000, as per audited financials
- The planned activities must be non-commercial and limited to those allowed for liaison offices
- The parent company should agree to fund all operations in India fully
- You’ll need to route your application through an Authorized Dealer (AD) Category-I bank
- If your company is from a country like Pakistan or Bangladesh, the Ministry of Home Affairs needs to approve it further.
Registration Process of Liaison Office
Setting up a liaison office in India involves coordination. Consider it as a multi-step formality that requires careful attention to detail. Here’s a simplified version of the process:
- Gather Your Documents: You’ll need documents like incorporation papers, audited accounts, a board resolution, and identity proofs. .
- Submit Form FNC to Your AD Bank: This form and your documents go to an Authorized Dealer (your banker in India) for initial checks before forwarding your application to the RBI.
- RBI Review: The RBI examines your financials, activities, and plans closely. If everything checks out, it will issue formal approval.
- PAN, TAN, and RoC Formalities:Once approved, your liaison office must apply for
- PAN (Permanent Account Number)
- TAN if you’ll deduct taxes
- Register with the Registrar of Companies (RoC) by filing Form FC-1
From start to finish, the process usually takes 6–8 weeks, as long as your documents are in order.
Documents Required for Liaison Office in India
Register without delay! Here’s a quick list of the paperwork you typically need to submit:
- Form FNC – This is your formal RBI application
- Certificate of Incorporation – Must be notarized and apostilled
- MoA and AoA – Your company’s governing documents
- Audited financials for the last 3 years – To prove profitability and net worth
- Board resolution – Saying yes to opening an office in India
- KYC and banker’s report – From your existing banker overseas
- Details of your Indian representative – With ID and address proof
- Lease agreement (if available) – For the Indian office location
Compliance Requirements for a Liaison Office in India
After your liaison office is established, the journey continues. Many companies struggle here. However, Compliance for liaison offices is simpler than for revenue-generating entities, but you must stay vigilant. Here’s what that looks like:
- Annual Activity Certificate (AAC): Each year, a Chartered Accountant must issue a certificate confirming your compliance with approved activities for your Authorized Dealer bank and RBI.
- Income Tax Filings: Even if you’re not earning income in India, you must still file annual IT returns. Your accounts should show that operations are fully funded by the parent company.
- Registrar of Companies (RoC): File Form FC-3 and FC-4 with the Ministry of Corporate Affairs for your financials and business activities in India.
- Renewals & Closure (When the Time Comes): If your office approval is time-bound, don’t miss your renewal window. Planning to close? Get a No Objection Certificate (NOC) from the tax department, then apply for official closure with the RBI and RoC.
Our Comprehensive Services for the Liaison Office
At Mercurius, we’ve seen this process from both sides—companies excited to enter India, and companies stressed about the endless forms. Our job is to make your entry smooth, compliant, and free of regulatory headaches.
Here’s how we can help:
- Initial strategy call to assess if a liaison office is your best option
- Document prep and review, including Form FNC and RBI paperwork
- Direct coordination with your AD bank for application submission
- Help with PAN, TAN, and RoC filings after RBI approval
- Ongoing support for Annual Activity Certificates and tax filings
- Complete assistance with renewals or voluntary closure
Ready to Get Started?
Whether you just want to ask a few questions or you are ready to apply for Liaison Office online, we’ll walk you through it step-by-step. Our goal is simple: help you go from idea to operation—quickly, legally, and confidently.
Feel free to contact us.
FAQs
No, a liaison office is not allowed to earn income in India. It cannot offer services, issue invoices, or sign business contracts locally. The only purpose of this office is to support non-commercial functions like communication, brand promotion, and market research. All expenses must be covered via foreign remittance.
Typically, the RBI grants approval for a three-year period, after which a renewal must be filed. Renewal requests should be submitted in advance, along with documents showing continued compliance. If you're planning to exit, you’ll need to apply for closure and clear all tax and reporting obligations first.
Yes, a liaison office can hire Indian staff, but only for non-commercial roles. Employees can support administration, communication, or technical coordination. Their salaries and other operating expenses must be paid from funds remitted by the parent company—no local revenue can be used for salaries.
You must file an Annual Activity Certificate with the RBI, submit income tax returns, and complete RoC filings like FC-3 and FC-4. Even though there’s no income earned, maintaining books and staying compliant keeps the office in good legal standing and ensures future approvals go smoothly.
Yes, if a foreign company decides to begin commercial activity in India, it can apply to convert the liaison office into a branch office or register a subsidiary. A new approval process must be followed, including registration with the Ministry of Corporate Affairs and relevant tax departments.
Not usually. Since it doesn’t supply goods or services in India, GST doesn’t apply. However, in specific scenarios, like reverse charge on imported services, you might need to evaluate GST obligations. It’s best to consult a tax advisor based on your specific transactions and operations.
The Reserve Bank of India is the primary authority. Your application is routed through an Authorized Dealer Category-I bank, which first vets your documents and submits them to the RBI. Once approved, you’ll need to follow up with registrations under the Income Tax Department and RoC.
No, a liaison office cannot purchase property in India. However, it can lease office premises to carry out permitted operations. All lease payments must be made using funds transferred from the foreign parent company. Ownership rights over immovable property are not allowed under the liaison office regulations..
Companies from countries like Pakistan and Bangladesh need extra approvals from the Ministry of Home Affairs. Some sensitive sectors also require additional security clearance. In such cases, setting up a liaison office can take longer, and it’s advisable to work with experts who understand the documentation and clearance process.
The Authorized Dealer bank is the first checkpoint in your application. They accept and verify your documents, forward your case to the RBI, and help with post-approval banking needs. They also monitor your annual filings and foreign fund inflows and help ensure you stay compliant throughout your operation.
