India is one of the fastest-growing economies in the world. Many foreign companies are now exploring opportunities in India because of its large market size, strong talent base, and strategic business environment. For businesses that want to study the Indian market before full-scale entry, setting up a Liaison Office is often the first step.
A Liaison Office helps a foreign company maintain communication and coordination with customers, suppliers, and partners in India. It does not carry out commercial or revenue-generating activities. Instead, it acts as a representative office. This makes it a suitable option for foreign companies that want to understand the Indian market before investing in operations.
In this blog, we will explain the regulatory process, documentation, eligibility, and compliance requirements for establishing a Liaison Office in India.
What Is a Liaison Office in India?
A Liaison Office is also known as a Representative Office. It works only for administrative and coordination purposes. The primary objective is to understand market behaviour, build connections, and explore potential opportunities.
A Liaison Office is allowed to:
- Represent the parent company in India
- Communicate and coordinate with clients and partners
- Promote product or service offerings
- Build brand presence
- Support export/import communication
- Conduct market research and feasibility studies
However, it is not allowed to:
- Generate revenue
- Sign business contracts
- Provide services or consultancy
- Earn commission or fees
- Perform trading or manufacturing
This restriction ensures that foreign companies only observe and coordinate, not operate commercially.
Regulatory Authority for Liaison Office Registration
In India, the Reserve Bank of India (RBI) is the main authority responsible for approving liaison office applications. The registration also requires compliance with:
- Foreign Exchange Management Act (FEMA)
- Companies Act, 2013
- Ministry of Corporate Affairs (MCA)
- Income Tax Department
- Local state laws and reporting authorities
Foreign companies must also provide proof of strong financial stability. Generally, a company must have a minimum net worth of USD 50,000 supported by audited financial statements.
Eligibility Criteria for Liaison Office Setup
To establish a Liaison Office in India, a foreign parent company must:
- Be financially sound
- Have a strong business track record (minimum 3 years suggested)
- Support the office with expenses from foreign inward remittance
- Agree not to engage in revenue-based operations
The parent company must confirm that all operational expenses will be funded directly from abroad and not through income generated in India.
Required Documents for Registration
Several documents are required during the application process. Some common documents include:
- Certificate of incorporation of the parent company
- Charter documents (Memorandum and Articles of Association)
- Audited financial statements for the last three years
- Resolution authorizing setup of a liaison office
- Details of proposed office activities
- Letter of comfort from the parent company
- KYC documents of authorized signatories
- Identity proof and passport copies of representatives
All foreign documents must be:
- Notarized
- Apostilled or legalized by the Indian Embassy
- Submitted in English (translated if required)
Step-By-Step Registration Process
The process includes multiple stages and government approvals. Below is a simplified structure:
Step 1: Application to RBI
Foreign companies submit an online application through the government system for approval. The application is reviewed based on financial strength, business model, and purpose.
Step 2: Approval from RBI
Once the RBI verifies the documentation and eligibility, the approval is granted.
Step 3: Certificate of Establishment
After receiving RBI approval, the company must register with the Ministry of Corporate Affairs (MCA) and obtain a Certificate of Establishment.
Step 4: PAN and TAN Registration
The Liaison Office applies for a Permanent Account Number (PAN) and a Tax Deduction and Collection Account Number (TAN).
Step 5: Bank Account Opening
A non-interest-bearing bank account is opened in India for financial transactions.
Step 6: Office Setup and Local Registration
Depending on the state, additional registrations, such as Shops & Establishment Act registration, may be required.
Permitted Activities of a Liaison Office
A Liaison Office can perform only non-commercial activities. Permitted activities include:
- Promoting imports and exports
- Facilitating communication between the foreign company and Indian parties
- Market research and industry research
- Coordinating business development inquiries
- Acting as a communication channel
All expenses must be paid using foreign remittances.
Compliance Requirements After Registration
Once established, a Liaison Office must follow ongoing compliance requirements such as:
- Annual Activity Certificate (AAC) to the RBI
- Statutory audit by a certified auditor
- Income tax filing, even if there is no revenue
- Compliance with GST, if applicable
- Filing with MCA
- Monthly reporting of inward remittances
Non-compliance can lead to penalties or cancellation of the office license.
Renewal and Validity
A Liaison Office license is generally granted for three years. After this period, renewal is required. The renewal process again requires demonstrating financial capability and adherence to compliance rules.
Closure of Liaison Office
When the parent company decides to discontinue operations in India, closure formalities must be completed. This includes:
- Clearance of liabilities
- Submission of closure request to RBI
- Final audit report
- Confirmation from tax authorities
Only after approvals can the office officially shut down.
Why Businesses Choose a Liaison Office in India
Many foreign companies prefer a liaison office because:
- It provides a low-risk entry into India
- It allows brand development and market study
- It helps build business relationships
- It requires lower investment than a subsidiary
- It avoids complicated operational regulations
This makes it a suitable option for early-stage expansion planning.
Conclusion
Liaison Office Registration in India requires proper planning, documentation, and compliance with RBI and FEMA regulations. Although the setup does not permit commercial activities, it plays an important role for foreign companies exploring Indian markets. With proper guidance and professional support, the process becomes smooth, compliant, and well-structured.
For reliable assistance and expert compliance support, many businesses choose experienced advisory partners who understand regulations and documentation. This ensures a faster and legally correct setup process with ongoing compliance support. With professional guidance from experts like Groom Tax, the entire liaison office registration journey becomes smoother, more accurate, and fully compliant with Indian regulatory standards.
