A Project Office (“PO”) refers to a place of business that established in India to represent the interests of a foreign company executing a project. Such offices are prohibited from carrying on any activity other than those which relates to the execution of the project for which such office is established.
A foreign company can establish a project office in India either on a temporary basis or on permanent basis, provided that the foreign company has been assigned a project from the government or private sector to be executed by them in India. Registration process of Project Office with RBI & ROC must be completed before it starts operating. There are certain conditions which require to be fulfilled before an application is moved for Project Office Registration.
Reserve Bank of India (“RBI”) has given general permission to foreign companies to establish POs in India, provided they have secured a contract from an Indian company to execute a project in India, and
- the project is financed by inward remittance directly from abroad; or
- the project is financed by a bilateral or multilateral International Financing Agency; or
- the project has been absolved by an appropriate authority; or
- a company or entity in India which is awarding the contract has been granted Term Loan by a PFI or a Bank in India for the project.
However, if the above criteria’s are not fulfilled, the foreign entity has to approach the RBI Central Office, for take approval.
Setting up of PO by foreign not-for-profit organization (“NGO” or “NPO”) / foreign government bodies / departments is comes under the government route. Such entities are required to get prior permission from RBI to establish an office in India. Without obtaining prior permission of RBI, no person being a citizen of / registered in Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau can establish a PO in India.
Time limit for opening PO
- The office shall be opened within 6 months from the date of approval letter.
- AD Category-I bank may give extension for 6 months for reasons beyond the control of the person residing outside India.
- Further extension if any, may be granted by RBI only.
Validity of PO
PO remains valid for the entire term of the project till the project is achieved or wound up.
Important points to be considered
- Proprietary concerns which are established in abroad are not allowed to start a project office in India.
- A foreign entity’s project office is allowed for the possession of any property for carrying out activities which are permitted by RBI or for their own use.
- Only non-interest bearing current accounts can be sustained by a project office in India.
- If at the time of setting up of project office in India, approval from RBI is not obtained then it is necessary to inform about the project office to Registrar of Companies in the prescribed form to inform about the setup of project office with all important documents within the time specified.