Project Office

"Project Office" means a place of business to represent the interests of the foreign company executing a project in India but excludes a Liaison Office.

The project office is the ideal method for companies to establish a business presence in India, if the object is to have a presence for a limited period of time. It is essentially a branch office set up with the limited purpose for executing a specific project. Foreign companies engaged in turnkey construction or installation normally set up a project office for their operations in India.

A foreign corporation, which has secured a contract from an Indian company to execute a project in India, is allowed to establish a project office in India without obtaining prior permission from RBI. The RBI has granted a general permission to a foreign entity for setting up a project office in India subject to the following conditions:

• It has secured from an Indian company a contract to execute a project in India; and
• The project is funded by inward remittance from abroad; or
• The project is funded by a Bilateral International Finance Agency; or
• The project has been cleared by an appropriate authority; or
• A company or entity in India awarding the contract has been granted Term Loan by a Public Financial Institution or a bank for the projec

RBI has also granted general permission to foreign entities to remit the surplus on winding up/completion of projects through Authorised Dealers.

Pursuant to the setting up of the Project office, the Registrar of Companies needs to be intimated in Form 44, about the setting up of a place of business under Section 592 of the Companies Act, 1956.

Such offices can not undertake or carry on any activity other than the activity relating and incidental to execution of the project. The exchange control regulations prescribe certain additional requirements for setting up project office sans its approval.

The foreign corporation which sets up such a project office is required to furnish a prescribed report to the concerned regional office of RBI under whose jurisdiction the project office is set up. The project office is treated as an extension of the foreign corporation in India and is taxed at the rate applicable to foreign corporations.

Procedure to Set up a Project Office in India

The procedure for opening such an office is to apply to the RBI with details of the project to be executed and the details of the project office to be set up. RBI will accord approvals specific to the project. The project office cannot operate after the completion of the specified project.