Liaison Office

Liaison offices as the word suggest it is an office that facilitates close working relationships between the parent company situated abroad and the business parties in India. The other term for Liaison offices is Representative Office. Liaison offices have restrictions and cannot undertake any business activities in India and also cannot earn any income in India.

The liaison office can undertake only the following activities in India:

• Represent the foreign company in India.
• Promote export from or import to India.
• Encourage technical/financial collaboration between parent or group companies and Indian companies.
• Act as a communication channel between the parent company and the Indian company.

Advantages of opening Liaison office :

• Less compliance cost as it is not a separate legal entity.
• Easy winding off procedure.
• No taxability issues as there is no income accrual.
• Indian transfer pricing regulations do not apply to transactions undertaken between liaison offices and their overseas group

Disadvantages to opening Liaison office :

• Need to register with the Registrar of Companies.
• Has to ensure compliance with specific procedural requirements stipulated under the Companies Act, 2013.
• Need to submit a Certified Annual Activity Certificate setting out the activities carried out in a particular year.
• Unable to engage directly in import and export activities