How Much Does It Cost to Set Up and Maintain a Liaison Office in India?

What Makes Up the Setup Cost?

Setting up a Liaison Office involves more than submitting one application. A foreign company must first obtain approval from the Reserve Bank of India (RBI) through an Authorised Dealer bank. The application is made in Form FNC and needs supporting documents, including the foreign company's incorporation or registration documents and latest audited balance sheet.

The setup work can include:

• Preparing the application
• Obtaining RBI approval
• Coordinating with the Authorised Dealer
• Registering the office with the Registrar of Companies
• Obtaining CIN
• Applying for PAN and TAN
• Completing other required registrations

Once RBI approves the office, it receives a Unique Identification Number (UIN). It must then register with the Ministry of Corporate Affairs and obtain a CIN, followed by PAN and TAN.

Does a Liaison Office Need Funds to Operate?

Yes, but the source explains that the expenses of a Liaison Office are met by the foreign head office. Funds are received through inward remittances from the head office outside India.

The source also states that the applicant foreign entity should have a net worth of at least USD 50,000 or equivalent, along with a profit-making track record during the preceding three financial years. This is an eligibility condition for opening the office, not a stated setup fee.

What Are the Ongoing Costs of a Liaison Office?

Maintenance involves regular accounting, reporting, tax-related work, and other compliance requirements. The office also needs to maintain financial books and complete its required filings.

Ongoing work may include:

• Maintaining financial books
• Payroll processing
• Annual audit of accounts
• Annual Activity Certificate
• Withholding tax returns
• GST returns where applicable
• Labour-law compliance
• Annual reporting to authorities
• Required certificates
• PKP provides support for these areas as part of its Liaison Office services.

How Long Does RBI Approval Last?

RBI permission is initially granted for three years. It can be extended by the designated Authorised Dealer bank for another three-year period, subject to the stated conditions.

For extension, the Liaison Office needs to have submitted its Annual Activity Certificates for previous years and its account with the designated bank must be operated according to the approval terms.

This means maintenance isn't only about keeping the office running. Regular reporting and compliance also matter when the company wants to continue its Liaison Office.

What Should You Budget For?

Since the PKP material does not provide a fixed monetary setup or maintenance fee, businesses should look at the work involved rather than rely on one standard figure.

The main areas to consider are:

• RBI approval and application work
• Registration and required documentation
• Accounting and bookkeeping
• Payroll, where applicable
• Audit and Annual Activity Certificate
• Tax and GST-related filings, where applicable
• Labour-law compliance
• Annual reporting and certificates

Plan the Cost Around Your Requirements

The cost of maintaining a Liaison Office depends on the services and compliance work required for the business. A foreign company should therefore consider both the initial setup work and the ongoing responsibilities before opening an office in India. If you're planning a liaison office in India and need help with approval, registration, accounts, reporting, and compliance, contact PKP Consult to discuss your requirements.

Know More - What Activities Can a Liaison Office Perform in India?