Project offices, as the name suggests, are set up by the foreign corporate(s) to execute a project India. For example, Delhi Metro uses the services of various foreign corporate for their domain knowledge and expertise and accordingly such corporate(s) uses the project office platform given under FEMA / FDI Guidelines to set up their base in India in line with the commercial arrangements required for the execution of the project subject to compliance of the norms as specified under FDI Guidelines. Therefore such project office basically represents the foreign company in India.
General permission has been granted by the RBI to set up a project office in India only if it has secured from an Indian company, a contract to execute a project in India. Some of the conditions required to set up Project Office in India:
(i) the project is funded directly by inward remittance from abroad?
(ii) the project is funded by a bilateral or multilateral International Financing Agency?
(iii) the project has been cleared by an appropriate authority?
(iv) 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;
If the above criteria are not met, the foreign entity has to approach to the RBI for approval.
Foreign Company has to get itself registered with the Registrar of Companies with in 30 days of the establishment of Project office in India.
(i) As the project office is allowed to be set up for a specific purpose like execution of a project as explained above, such offices cannot do any other activity other than the activity relating and incidental to execution of the project.
(ii) Project offices 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 it can carry out permitted / incidental activities from lease property subject to lease period not exceeding five years.
(iii) As the project office in involved in execution of a project on commercial/professional basis therefore it is treated as taxable entity in India.
(i) All new entities setting Project office has to submit a report within 5 working days of becoming functional to the Director General police of the State concerned in which Project office has been established and to the AD.
(ii) The Project Office shall also submit to the AD branch on an annual basis, a Certificate from a Chartered Accountant showing the Project Status and certifying that the accounts of the Project Office has been audited and the activities undertaken are in conformity with the General / Specific permission given by the Reserve Bank
(iii) The foreign company establishing a Project Office in India is to furnish report through the concerned AD branch within 2 months of establishment of the Project Office to the concerned Regional Office of Reserve Bank of India under whose jurisdiction the Project Office is set up, incorporating the following details.
a. Name and address of the Foreign Company,
b. Reference Number and date of letter awarding the contract referred to in clause (ii) of Regulation 5 ,
c. Particulars of the authority awarding the projects / contract,
d. The total amount of contract,
e. Address / e-mail address / telephone number / fax number of the Project Office,
f. Tenure of Project Office,
g. Brief details of the Project undertaken,
h. AD branch with whom the account has been opened and the foreign currency in which the account is opened,
i. An undertaking to the effect that the Project Office is eligible to avail of the General Permission under Regulation 5(ii)
(iv) Project office has to file Report with the DGP concerned on annual basis along with a copy of the Annual Activity Certificate, and also with the AD concerned
Foreign Currency Account
Authorized Dealer can open non-interest bearing Foreign Currency Account for Project offices in India subject to the compliance of the following:
(i) 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.
(ii) The contract, under which the project has been sanctioned, specifically provides for payment in foreign currency.
(iii) 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.
(iv) The permissible debits and credits in the account shall be as under:
• Payment of project related expenditure.
• Foreign currency receipts from the Project Sanctioning Authority
• Remittances from parent/group Company abroad or bilateral/multilateral international financing agency
(v) 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.
(vi) The Foreign Currency accounts have to be closed at the completion of the Project.
(i) AD Category – I bank can permit intermittent remittances by Project Offices pending winding up / completion of the project provided they are satisfied with the bonafide of the transaction, subject to the following:
a. The Project office submits a Chartered Accountants’ certificate to the effect that sufficient provisions have been made to meet the liabilities in India including Income-Tax etc.
b. An undertaking from the Project office that the remittance will not, in any way, affect the completion of the Project in India and that any shortfall of funds for meeting any liability in India will be met by inward remittance from abroad.
(ii) Inter Project transfer of funds will be permitted with the prior permission of the concerned Regional office of the RBI under whose jurisdiction the Project office is situated.
“They have an amazing ability to deal with pressure, while having the patience to explain complex legal requirements in simple terms to the client. The lawyers work with integrity and ethics. I would definitely recommend this, a dependable and highly qualified law firm.”