Cross Border Transaction


Services linked to transactions involving two or more nations are referred to as Cross Border Transaction. Two laws in India, the Foreign Exchange Management Act of 1999 and the Income Tax Act of 1961, as well as double taxation avoidance agreements with the corresponding nations, appear to be particularly concerned when an individual (whether an Indian resident or a foreign resident) engages in cross-border transactions.

Therefore, in order to engage in a Cross Border Transaction, a person must deal with both of the aforementioned Acts.

The term “advance ruling” refers to (a) the resolution of a legal or factual issue pertaining to a transaction that a non-resident applicant has completed or proposes to complete, as well as the resolution of the non-resident applicant’s tax liability arising from such a transaction with a resident applicant; (b) the resolution of an issue pertaining to the computation of total income that is currently before any income-tax tribunal. At J J J And Company LLP, we carefully examine each client’s case before the Advance Ruling Authorities and create the necessary paperwork to be submitted to the appropriate authority. Along with examination of the ruling authority’s imposed decision after the fact, we also provide representational services, which involve defending clients in front of the ruling authority.

J J J And Company LLP helps non-residents launch, develop, grow, diversify, and, if necessary, close Cross Border Transaction businesses in India. We offer non-residents and young entrepreneurs consulting services to help them smoothly plan and carry out the establishment of their businesses. We offer creative answers to any questions about starting a Cross Border Transaction business in India using tools that are specifically designed for comprehension. Our consulting services have grown to include additional services including project report writing, feasibility analysis, market research, project planning, and many more.

Two regulations, the Companies Act of 2013 and the Foreign Exchange Management Act of 1999, essentially govern the incorporation of a Cross Border Transaction company in India that involves foreign investment (FEMA). The main focus of the Companies Act is compliance with the rules and regulations set forth by the registrar of companies, whereas the FEMA requires compliance with the rules and regulations set forth by the Reserve Bank of India with regard to foreign direct investment in India. It is essential given the aforementioned that our scope of service include consulting services to ensure adherence to both the Companies Act of 2013 and the FEMA of 1999, as well as coordination with the appropriate authorities. As a consultancy firm, we support our client in all aspects of compliance with the Companies Act and the FEMA (RBI).

In order to form a joint venture in India to run its business, a foreign entity will choose a local partner there. The foreign entity and the local partner sign a Letter of Intent or Memorandum of Understanding (MOU), which outlines the basis for the joint venture agreement. All of the commercial terms are contained in the joint venture agreement, which must be compliant with national and international law.

A foreign person or business may invest 100% FDI in an Indian company using the automatic method in order to be registered as a foreign entity in India. The Indian company will become a wholly-owned subsidiary of the foreign entity/business when it makes a 100% FDI investment in it.

To conduct business in India, a foreign corporation may register a liaison office, project office, or branch office there. However, the RBI or the government must approve the opening of these offices.

A liaison office is essentially a representative office established with the goal of learning about and comprehending the business and investment environment. By acquiring pertinent business data, the primary goal of opening a liaison office is to investigate potential commercial prospects in India. This aids businesses in creating a strategy to take advantage of India’s current business potential. No commercial, trading, or manufacturing activity may be carried out by a liaison office; instead, it must be supported by remittances received from the parent firm through regular banking channels. Only the following activities are permissible for the Liaison Office:

Representing the parent firm in India; promoting export and import from and to India; fostering technical and financial partnerships between the parent companies and Indian businesses; and serving as a liaison between the parent company and Indian businesses.

Any foreign corporation wishing to establish a liaison office in India must first receive prior authorisation from the RBI, the country’s central bank. An approval can be renewed when it expires and is often granted for one to three years.

In order to enter India’s expanding market, a physical presence is required.

When selecting a location for their Indian office, foreign businesses should take state legislation, physical connectivity, and local expenses into account.

Foreign corporations can do full-fledged Cross Border Transaction business in India as a Branch Office (“BO”) in India. BO may engage in trading activities that are identical to or mostly similar to those of its parent or group firms. BO is permitted to subcontract these services to an Indian manufacturer but is not permitted to engage in direct production activity.

The Reserve Bank of India authorises the opening of a branch office. According to the 2013 (Indian) Companies Act, a branch office of a foreign business must be compulsorily registered after receiving RBI clearance.

After being registered under the Companies Act of 2013, the branch office is able to conduct business in the same manner as a domestic company. A branch office, as opposed to a liaison office, can provide revenues back to the foreign parent firm through sales made in the local market.

An authorised and registered branch office may engage in the following activities:

  • Goods export and import
  • Providing advisory or professional services
  • Carrying out research projects for the main company.
  • Fostering financial or technical partnerships between Cross Border Transaction Indian businesses and the parent or international group enterprise.
  • Working as both buying and selling agents for the parent corporation in India.
  • Providing information technology services and developing software in India.

J J J And Company LLP helps our clients establish branch offices in India by making sure that all compliance requirements are adequately completed, so the client doesn’t have to worry about the setup process.

Establishment requirements The following conditions must be met in order for a foreign entity to open a branch office or liaison office in India:

Eligibility Criteria:

RequirementsFor Branch OfficeFor Liaison Office
Profit making track recordimmediately preceding 5 financial yearsimmediately preceding 3 financial years
Net Worth*> USD 100,000 or equivalent> USD 50,000 or equivalent

According to the most recent audited balance sheet or account statement, which was certified by a certified public accountant or any registered accounts practitioner by whatever name called, net worth is the sum of paid-up capital and free reserves, less intangible assets.

Registration Request Application If the applicant company satisfies the eligibility requirements listed above, it must submit an application in Form FNC (as per Annex B of the Foreign Exchange Management (Establishment in India of a Branch Office, Liaison Office, Project Office, or Any Other Place of Business) Regulations, 2016) to an Authorized Dealer Category-I bank with the supporting documentation listed below:

  • A copy of the Memorandum of Association and Articles of Association attested by the Notary Public in the country of registration, as well as the Certificate of Incorporation / Registration.

[If the original certificate is not in English, it may be translated into English, notarized as described above, and cross-verified/attested by the Indian Embassy/Consulate in the country of origin.]

  • The applicant company’s audited balance sheet for the most recent three or five years, depending on whether it is a branch office or a liaison office.

[An Account Statement certified by a Certified Public Accountant (CPA) or any Registered Accounts Practitioner by any name, clearly displaying the net worth, may be supplied if the laws/regulations of the applicants’ home country do not require an audit of the accounts.]

  • A bankers’ report outlining how long the applicant has had banking relationships with their bank in the host nation or the country of registration.
  • A power of attorney in favour of the Form FNC signatory in the event that the Form FNC’s Head of the foreign entity is absent.

The AD Category-I bank will approve the foreign entity for establishing BO/LO in India after conducting due diligence regarding the applicant’s background, assuring itself as to adherence to the eligibility criteria for establishing BO/LO, antecedents of the promoter, nature and location of the applicant’s activity, sources of funds, etc., and compliance with the extant KYC norms. In accordance with the FEMA Regulations and Directions, the AD Category-I banks may develop an appropriate policy for handling these applications.

However, the AD Category-I bank must send a copy of the Form FNC and information about the approval it proposes to grant to the General Manager, Reserve Bank of India, CO Cell, New Delhi, in order to assign a Unique Identification Number (UIN) to each BO/LO before sending the applicant the approval letter. The AD Category-I bank shall issue the authorisation letter to the non-resident company for establishing BO/LO in India after receiving the UIN from the Reserve Bank. This will allow the Reserve Bank to have a current list of all foreign businesses that have been given permission to establish BO/LO in India and to submit it to its website.

To establish a branch office, liaison office, project office, or any other place of business in India, a person resident outside of India must submit a Letter of Comfort from their parent company in the format specified in Annex A of the Foreign Exchange Management (Establishment in India of a Branch Office, Liaison Office, Project Office, or Any Other Place of Business) Regulations, 2016, provided that the parent company satisfies the specified criteria for net worth and profitability.

Time: 45 days are typically needed to register a LO or BO. For businesses engaged in construction and development as well as Non-Banking Finance Companies (NBFCs), the validity period for establishing a liaison office has been established at two years. In all other instances, the setting up of a LO is valid for a period of three years. After three years, renewal is necessary. However, in the case of BO, registration renewal is typically not necessary, though in exceptional circumstances RBI may grant clearance for a period of two to three years after which renewal is necessary.

Validity of Approval: Within six months after receiving approval, the LO/BO must open the office. In the event that the office is not established within six months, the approval will expire. Companies seeking further extensions of time must first obtain RBI approval.

Moving an office: AD banks are now permitted to approve moving an office to another Indian city. If the office move takes place within the same city, no such approval is necessary. It would only be necessary to notify the AD bank of the new address.

If there hasn’t been a change in the ownership of the foreign company, the AD bank may allow a name change for the LO/BO. However, current LO/BO must be closed if the name change is the result of a merger, acquisition, or change in the ownership of the parent firm. Additionally, a new approval would be need for the same.

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