Setting up Project Office in India
Home › Setting up Project Office in India

Q.1. Who can set-up a project office? 

Ans. A foreign company that has been awarded a contract by an Indian company can set up a Project Office to execute a project in India. For opening a Project or site office, the concerned foreign company will have to file Form FNC-10 with the regional office of the Reserve Bank of India. 

Q.2.  What are the conditions for establishing a project office?

The conditions prescribed by RBI for establishing a Project Office in India are:
• The project is funded directly by inward remittances from abroad; or
• The project is funded by a bilateral or multilateral International Financing Agency; or
• The project has been cleared by an appropriate authority; or
• 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.

Q.3. Whether profits can be repatriated freely? How are profits of project offices taxed in India?

Profits earned by a Project Office can be repatriated freely after completion of the project subject to payment of taxes in India and fulfillment of other conditions.  Like a branch office, a project office is also treated as an extension of a foreign company in India and taxed at the rate applicable to foreign companies.

Q.4. Can a Project Office open a foreign currency account in India? 

Authorized Dealer (AD) Category - I Banks can open “non-interest” bearing Foreign Currency Account for Project Offices in India subject to the following conditions: 
• 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.
• The contract, under which the project has been sanctioned, specifically provides for payment in foreign currency.
• 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. 
• 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 company abroad or bilateral / multilateral international financing agency.
• 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 Authorized Dealers. Further, the Accounts shall be subject to 100 per cent scrutiny by the Concurrent Auditor of the respective Authorized Dealer banks. 
• The Foreign Currency accounts have to be closed at the completion of the Project. 

Q.5. Can intermittent remittances be carried out by Project Offices? 

Yes. An AD Category – I bank can permit intermittent remittances by Project Offices pending winding up / completion of the project provided they are satisfied with the bonafides of the transaction, subject to the following:
• The Project Office submits an Auditors' / Chartered Accountants’ Certificate to the effect that sufficient provisions have been made to meet the liabilities in India including Income Tax, etc.
• 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.
However, Inter-Project transfer of funds requires prior permission of the Regional Office concerned of the Reserve Bank of India under whose jurisdiction the Project Office is situated.