Overview of Project Office Registration

Setting up a project office in India is essential for a foreign company planning to execute a specific project. India, being one of the world’s fastest-growing economies, has made significant efforts to become a preferred business destination. To streamline the process, the government has delegated certain RBI powers to Authorized Dealer (AD) Banks, ensuring a more efficient and transparent registration process. This has made it easier for foreign companies, including non-residents, to establish a project office in India.

Under RBI regulations, a foreign parent company can register a project office in India to represent its interests in executing projects. However, the parent company must have a formal agreement with an Indian entity, either in the government or private sector, to undertake the project.

A project office can only engage in activities directly related to the project it is set up for, including incidental and related tasks. The registration process follows the guidelines established under Section 6(6) of the Foreign Exchange Management Act (FEMA) 1999.

The Reserve Bank of India (RBI) grants approval for foreign companies to establish a project office in India. The foreign company must first secure a contract with an Indian entity before proceeding with the registration. Additionally, the company must obtain a registration certificate from the Registrar of Companies (ROC) in compliance with the Companies Act of 2013, adhering to all procedural requirements.

Project Office Registration Procedure

The process for registering a Project Office (PO) in India is as follows:

1. Legalization of Documents

• All documents of the foreign company must be filed with the Reserve Bank of India (RBI), including the Certificate of Incorporation, Memorandum of Association (MOA), Articles of Association (AOA), and board resolutions.
• Documents signed by the authorized signatory must be legalized by the Indian Embassy or apostilled according to the Hague Convention.

2. Application to the Reserve Bank of India through AD Bank

• The foreign parent company submits its application to the RBI through an Authorized Dealer (AD) Bank. The AD Bank facilitates all communication with the RBI.

3. KYC Verification from the Parent Company’s Bank

• A request for verification is sent to the parent company's bank. Once verified, the bank confirms the documents, and the application proceeds for approval. Additional documentation may be requested based on circumstances.

4. Approval from the Reserve Bank of India

• Once the application is approved by the RBI, the next step is to open a bank account for the project office, with foreign direct investment to be made within 180 days of the office's establishment.

5. Registration of the Project Office with the Registrar of Companies (ROC)

• Within 30 days of receiving RBI clearance, the foreign company must file an application with the ROC for project office registration in India. If there is an Indian director, they must have a Director Identification Number (DIN), and the authorized signatory must provide a digital signature for e-filing documents.

6. Opening a Bank Account, Obtaining PAN, and Tax Deduction Number

• The Project Office must obtain a Permanent Account Number (PAN) from the Income Tax Department, after which it can open a bank account. Additionally, the office needs a Tax Deduction Account Number (TAN) for complying with tax deduction at source (TDS) regulations.

7. Other Licenses and Registrations

• Depending on the type of business and location, the Project Office must comply with other regulations like Goods and Services Tax (GST), Provident Fund (PF), and Employee State Insurance (ESI).

8. Project Office Validity

• The Project Office will remain valid for the duration of the project, continuing until the project is completed or wound up.

Important Considerations:

• Private foreign companies are not permitted to open a project office in India.
• A foreign entity's project office may acquire property only to carry out activities authorized by the RBI or for its own use.
• Project offices can maintain non-interest-bearing current accounts only.
• The opening of a project office must be notified to the ROC within the prescribed time frame, along with all required documentation.

Project Office Accounts in Foreign Currency:

• Project offices can open non-interest-bearing foreign currency accounts with AD Category-I banks if certain conditions are met, such as:
  • The project is in accordance with RBI regulations.
  • The contract specifies foreign currency payments.
  • Two accounts can be opened, one in USD and another in the project’s currency, but both must be with the same AD Category-I bank.
  • These accounts are only used for project-related expenses and receiving payments from the parent company or international financial organizations.
  • The AD bank is responsible for ensuring that only authorized debits and credits are allowed in the foreign currency account.

At the conclusion of the project, the foreign currency accounts must be closed.

Remittance of Profit or Surplus:

• The Project Office can remit profits abroad after deducting applicable Indian taxes.
• The authorized dealer (Category-I bank) may allow remittance during project winding-up, provided the office submits:
  • An auditor’s certificate confirming that all tax liabilities are met.
  • Assurance that the remittance will not hinder the project’s completion, and that any shortfall in finances will be covered by inward remittance from the parent company.

Funds can be transferred between projects with the approval of the RBI’s regional office.

To close a Project Office, the following steps must be followed:

• The request for closure is made to the AD Category-I bank.
• Required documents include:
  • RBI/AD Bank approval for opening the PO.
  • Auditor’s certificate confirming the method of calculating the remittable amount, the disposal of assets, and the settlement of liabilities.
  • Confirmation that no foreign revenue remains unrepatriated to India.
  • A declaration that the project office is not involved in any legal actions in India.
  • Proof that the Annual Activity Certificate (AAC) has been submitted.
• Once the required documents are submitted and sectoral regulators approve, the AD Bank may authorize the remittance of winding-up proceeds.