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Liaison Office’ means a place of business to act as a channel of communication between the Principal place of business or Head Office by whatever name called and entities in India but which does not undertake any commercial /trading/ industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal banking channel.
By its very nature, a liaison office in India can act only as a communicative channel for the parent company to supply information on the Indian market and customers, and cannot carry on any business activities in India. As a result, the liaison office cannot generate any revenue in India and all the expenses of running and maintenance of the Indian office are required to be met out of the foreign exchange remitted from abroad.
Permitted activities for a Liaison Office in India
Conditions Imposed While Granting Permission
The conditions precedents for setting a liaison office in India are as follows:
Liaison offices also have to file regular returns compromising of Annual Audited Accounts, an annual activity report on the activities of the office and some other documents with the RBI and Registrar of Companies (MCA).
Procedure to Set up a Liaison Office in India
The procedure for setting up of a liaison office by a foreign company in India involves following two stages:
Since a liaison office is not allowed to earn any income, there is no tax liability of a liaison office or its parent company for this representative office.Maintenance of Bank Accounts
A liaison office in India is permitted to maintain and operate bank accounts in India but only with authorized dealers.