What Activities Can a Liaison Office Perform in India?

For foreign businesses from the USA, Singapore, Japan, Australia, the UK, and markets across the world, a Liaison Office can be a way to understand the Indian market before making a larger investment. It works as a link between the foreign parent company and Indian businesses. However, its role is limited. Liaison offices cannot carry out commercial activities or earn income in India.

What Can a Liaison Office Do in India?

A Liaison Office can support the parent company in building connections and understanding business opportunities in India. The activities listed by PKP include:

• Representing the parent or group company in India
• Promoting exports from or imports into India
• Promoting technical or financial collaborations
• Acting as a communication channel between the parent company and Indian companies

These activities allow the foreign company to stay connected with the Indian market without starting commercial operations.

How Does It Help a Foreign Company Understand India?

A Liaison Office mainly works as a representative office. It can collect information about possible market opportunities and sources of supply. It can also share information about the parent company and its products with prospective Indian customers or communicate information between Indian vendors and the parent company.

For a company exploring India, this can help it understand the local business environment and build relationships before making larger investments.

Can a Liaison Office Sell Products or Earn Income?

No. A Liaison Office is not allowed to carry out commercial, trading, or industrial activities, either directly or indirectly. It cannot earn income in India.

There are also other restrictions. A Liaison Office:

• Cannot borrow or lend money
• Cannot carry out trading activities
• Cannot earn income from its activities
• Cannot deal with certain immovable property without prior RBI approval

Its expenses are met through funds received from the foreign head office.

What Compliance Does a Liaison Office Need?

Even though it cannot earn income, a Liaison Office still has reporting and compliance work in India.

This can include:

• Annual Activity Certificate
• Audited balance sheet
• Form 49C filing
• Applicable tax withholding
• GST requirements under reverse charge, where applicable
• Labour-law compliance when employees are present
• Annual reporting to the concerned authorities

The office also needs to maintain its financial books and complete the required filings within the applicable timelines.

How Can PKP Help With Liaison Office Activities?

Setting up and running a Liaison Office involves RBI approval, registration, accounting, reporting, and other compliance work. PKP supports foreign businesses with:

• RBI approval
• Registration with the Registrar of Companies
• CIN, PAN, and TAN
• Maintenance of financial books
• Payroll processing
• Withholding tax and GST returns
• Annual audit
• Annual Activity Certificate
• Statutory compliance
• Annual reporting to relevant authorities

This gives the parent company support for both the setup and regular requirements of its Indian office.

Understand the Role Before Setting Up

A Liaison Office can represent a foreign company, promote trade, support collaborations, collect market information, and maintain communication with Indian businesses. It cannot, however, conduct commercial activities or earn income in India. If you're considering liaison offices in India and need help with approval, registration, accounting, or compliance, contact PKP Consult to discuss your requirements.

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