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The set up and regulation of Project Office are governed by Foreign Exchange Management Act, 1999 and the Regulations issued by Reserve Bank of India from time to time. Project Office are generally set up by foreign entities to execute an awarded project by the Indian Companies. RBI allow foreign entities to establish project offices in India, provided they have secured a contract from an Indian company to execute a project in India.
General Conditions for setting up project office in India for a person resident outside India are given below:
The applications for establishment of Project Office in a sector in which 100% FDI is allowed are routed through designated AD Category I Bank. The application are submitted to AD Category-I bank in Form FNC along with the prescribed documents mentioned in the Form, as per the guidelines issued by the Reserve Bank of India.
PO can approach AD Category I Bank in India to open a Non Interest Bearing Foreign Currency Account for its operations in India subject to certain conditions. The permissible credits in bank account shall be foreign currency receipts from the Project Sanctioning Authority and remittances from parent/ group company abroad or bilateral/ multilateral international financing agency. While the permissible debits shall be payment of project related expenditure.
Project Office is just an extension of the foreign companies in India and cannot undertake any additional activity in India except the activities relating or incidental to the execution of the project.
Any foreign entity (except an entity from Pakistan) who has been awarded a contract for a project by the Government authority/Public Sector Undertakings or are permitted by the AD to operate in India may open a bank account without any prior approval of the Reserve Bank. Each Project Office can open two foreign currency accounts, usually one denominated in USD and other in home currency of the project awardee, provided both are maintained with the same AD Categoryâ€“I bank.
Remittance of Profit
AD Bank can permit intermittent remittances by Project Office pending winding up/ completion of the project provided they are satisfied with the bonafides of the transaction subject to certain conditions
Extension of fund and non-fund based facilities
AD Category I Bank may extend Fund/Non Fund facilities to Project Office on the basis of Board approved policy, business prudence and compliance to extant rules/regulations stipulated by DBR, RBI.
Closure of Project Office
Requests for closure of Project Office and for remittance of winding-up proceeds needs to be submitted to designated AD Category - I bank along with prescribed documents.
Application for establishment of Project Office
There is a general permission to non-resident companies to establish Project Office in India, provided they have secured a contract from an Indian company to execute a project in India and has also secured necessary clearances. In all other cases, the applications for establishment of Project Office in a sector in which 100% FDI is allowed are routed through designated AD Category I Bank. The application is required to be submitted to AD Category-I bank (AD Bank) in Form FNC along with the prescribed documents mentioned in the Form and the LOC (wherever applicable), as per the guidelines issued by the Reserve Bank of India. An applicant that has received a permission for setting up of a Project Office shall inform the designated AD Bank as to the date on which the Project Office has been set up which shall not be later than 6 months from the date of the approval letter.
Permissible debits and credits from bank account
The permissible credits in bank account shall be foreign currency receipts from the Project Sanctioning Authority and remittances from parent/ group company abroad or bilateral/ multilateral international financing agency. While the permissible debits to the account shall be payment of project related expenditure.
Validity period of Project Office The validity period of the Project Office is for the tenure of the project.
Annual Activity Certificate Project Office are required to submit Annual Activity Certificate (AAC) as at the end of March 31 each year along with the prescribed documents to the designated AD Category -I bank as well as Director General of Income Tax (International Taxation), New Delhi.
Registration with Registrar of Companies
A foreign company establishing a project office in India is required to file Form FC-1 with the Registrar of Companies within 30 days of the establishment of its place of business in India.
From Foreign Entity
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Approval of RBI for establishing Project Office is required in following cases: