Regulatory Alert - Revised Framework for LO BO PO Set up
Regulatory Update
Revised Framework for establishment of Liaison or Branch or
Project Office in India
Prepared by: Corpcode Consulting, India
5 April 2016
Intended for Private Circulation Only
Background
§ In order to further promote the ease of doing business in India, the Reserve Bank of India (RBI) has issued revised regulations* concerning establishment of foreign companies in India in the form of liaison office, branch office or project office (LO BO PO).
§ The revised regulations are termed as Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016.
§ Under revised regulations, the regulatory framework for setting up of LO BO PO has been liberalized to a large extent by delegating the power to Category I Authorized Dealer (AD) banks to approve the applications.
§ Revised regulations provides differential treatment to applicants from destinations like Pakistan, Iran, Afghanistan,
China etc. for which RBI approval would be required.
§ Further, relaxations in setting up of LO BO PO has been made conditional depending on applicant’s host country and location of the proposed office to be set up in India. RBI approval would be required for setting up of LO BO
PO in J&K, North East region, Andaman and Nicobar Islands.
* Issued vide RBI notification no. FEMA 22( R)/RB-2016 dated 31 st March, 2016
Intended for Private Circulation Only
Summary of provisions relaxed and tightened
Provisions Liberalized
Power to approve the applications for setting up of LO BO PO delegated to Category-I Authorized Dealer (AD) Bank
BO and PO can now raise fund and non-fund based facilities from banks
Transfer of assets of Branch/Liaison/Project Office to a Joint
Venture/Wholly Owned Subsidiary or other entity in India has been allowed with prior permission of AD Bank
Requirement of submission of report with Local Police Authorities has been withdrawn.
Registration with police in case of applicants from Bangladesh, Sri
Lanka, Afghanistan, Iran, China, Hong Kong, or Macau
Provisions Tightened
Office to be set-up within 6 months of approval
(Extensions permitted by AD Bank and RBI)
Applicants from specified countries to set up office in specific
Indian Region / states to obtain RBI Approval
For additional office, justification required for need of additional office(s)
Remittance of profits by Branch Offices (net of Tax) requires additional documentation with AD Bank
Intended for Private Circulation Only
Revised Approval Mechanism for LO BO PO
Applicant Category
Geography Based
Pakistan
Sector Based Other Applicants
Bangladesh, Sri Lanka,
Afghanistan, Iran, China,
Hong Kong, or Macau setting up office in:
J&K, North East Region,
Andaman & Nicobar
Defence,
Telecom,
Private Security;
Information and
Broadcasting Sector
Non Government
Organization
Not for Profit Organization
Body/Agency/Department of
Foreign Government
To be approved by AD Bank
To be approved by Reserve Bank of India
Intended for Private Circulation Only
1
Revised Process Chart for setting up of LO BO PO
2 3 4
Eligibility Check
Application to RBI/AD
Bank
Processing of
Application
Approval Letter
5
Opening of Office within 6 months of approval
6
If office is not opened within 6 months, to seek extension from
AD/RBI
7
Registration with State
Police Authorities for applicants from specified countries*
8
Submission of Annual
Activity Certificate to
AD Bank and
International Tax
Department by 30
September** of following year
*Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong, or Macau
**If financial year of LO BO PO is not closed on 31 March, in such cases due date shall be within 6 months from close of the financial year
Intended for Private Circulation Only
Intended for Private Circulation Only
