What is Project Office?
Reply:-
Foreign Companies planning to execute
specific projects in India can set up temporary project/site offices in India.
Query No.2:-
Reply:-
Yes, the Reserve Bank of India has
granted general permission to foreign companies to establish and invest in
Project Offices.
What are the activities a Project
Office can perform?
Reply:-
Such office cannot undertake or carry
on any activity otherthan the activity
relating and incidental to execution of the project.
What is the procedure to set-up
Project Office in India?
Reply:-
The Reserve Bank has granted general
permission to foreign companies to establish Project Offices in India, provided
they have secured a contract from an Indian company to execute a project in
India, and
a.
the
project is funded directly by inward remittance from abroad; or
b.
the
project is funded by a bilateral or multilateral International Financing
Agency; or
c.
the
project has been cleared by an appropriate authority; or
d.
a
company or entity in India awarding the contract has been granted Term Loan by
a Public Financial Institution or a bank in India for the project.
However, if the above criteria are not
met or if the parent entity is established in Pakistan, Bangladesh, Sri Lanka,
Afghanistan, Iran , China, Hong Kong or Macau, such applications have to be
forwarded to the Foreign Exchange Department, Reserve Bank of India, Central
Office, Mumbai for approval.
What are the bank accounts permitted
to a Project Office?
Reply:-
AD Category – I banks can open non-interest bearing Foreign Currency
Account for Project Offices in India subject to the following:
a)
The
Project Office has been established in India, with the general / specific
permission of Reserve Bank, having the requisite approval from the concerned
Project Sanctioning Authority concerned.
b)
The
contract, under which the project has been sanctioned, specifically provides
for payment in foreign currency.
c)
Each
Project Office can open two Foreign Currency Accounts, usually one denominated
in USD and other in home currency, provided both are maintained with the same
AD category–I bank.
d)
The
permissible debits to the account shall be payment of project related
expenditure and credits shall be foreign currency receipts from the Project
Sanctioning Authority, and remittances from parent/ group company abroad or
bilateral / multilateral international financing agency.
e)
The
responsibility of ensuring that only the approved debits and credits are
allowed in the Foreign Currency Account shall rest solely with the branch
concerned of the AD. Further, the Accounts shall be subject to 100 per cent
scrutiny by the Concurrent Auditor of the respective AD banks.
f)
The
Foreign Currency accounts have to be closed at the completion of the Project.
Do the profits or any surplus of
Project Office can be remitted outside India?
Reply:-
As project office will not manufacture
any product or render any services in India, so there is no question of gaining
profit but Project Offices may remit outside India the surplus of the project
on its completion, general permission for which has been granted by the RBI.
What are the general conditions
applicable to Project Office of foreign entities in India?
Reply:-
i.
The
general conditions applicable to Project Office of foreign entities in India
are as under;
ii.
Without
prior permission of the Reserve Bank, no person being a citizen of/ registered
in Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, China, Hong Kong or Macau
can establish in India, a Project Office or any other place of business.
iii.
Proprietary
concerns set up abroad are not allowed to establish Project Offices in India.
iv.
Entities
from Nepal are allowed to establish only Liaison Offices in India.
v.
Project
Offices of a foreign entity are permitted to acquire property for their own use
and to carry out permitted/incidental activities but not for leasing or renting
out the property. However, entities from Pakistan, Bangladesh, Sri Lanka,
Afghanistan, Iran, Bhutan or China are not allowed to acquire immovable
property in India even for a Branch Office. These entities are allowed to lease
such property for a period not exceeding five years.
vi.
Project
Offices are allowed to open non-interest bearing INR current accounts in India.
vii.
Powers
relating to transfer of assets of Project Office have been delegated to AD Category-1
Banks subject to compliance with certain stipulations as mentioned in A.P.DIR (Series
Circular) No. 142 dated June 12, 2014.
viii.
Authorised
Dealers can allow term deposit account for a period not exceeding 6 months in
favor of aoffice of a person resident outside India provided the bank is
satisfied that the term deposit is out of temporary surplus funds and the office
furnishes an undertaking that the maturity proceeds of the term deposit will be
utilised for their business in India within 3 months of maturity. However, such
facility may not be extended to shipping/airline companies.
ix.
Permission
to establish offices, in India by foreign Non-Government Organisations/Non-Profit
Organisations/Foreign Government Bodies/Departments, by whatever name called,
are under the Government Route as specified in A. P. (DIR
Series) Circular No. 23 dated December 30, 2009. Such entities are required to apply
to the Reserve Bank for prior permission to establish an office in India,
whether Project Office or otherwise.
Further,
All the new entities setting up PO shall also:
i.
submit
a report containing information as per Annex (given in AP DIR.Cir.35
dated September 25, 2012)
within five working days of the PO becoming functional to the DGP of the state
concerned in which PO has established its office; if there are more than one
office of such a foreign entity, in such cases to each of the DGP concerned of
the state where it has established office in India;
ii.
a
copy of the report as per above mentioned Annex shall also be filed with the
DGP concerned on annual basis along with a copy of the Annual Activity
Certificate/Annual report required to be submitted by PO concerned, as the case
may be.
iii.
A
copy of report thus filed as above shall also be filed with AD by PO concerned.
The existing PO shall henceforth
report the information as per above mentioned Annex along with the copy of
Annual Activity Certificate/Annual report to DGP of state concerned and also
file a copy of the same with AD bank
