Set Up a Branch Office in India from Austria

How to Set Up a Branch Office in India from Austria

A Branch Office (BO) is an extension of an Austrian parent company that allows it to conduct specific business activities in India without incorporating a separate legal entity. Unlike a Private Limited Company or Wholly Owned Subsidiary, a Branch Office is not a distinct Indian legal entity — it operates under the identity and liability of the Austrian parent company. This structure is particularly suitable for Austrian companies that want to test the Indian market, provide after-sales support, execute specific contracts, or engage in import-export activities.

With bilateral trade between India and Austria reaching approximately EUR 2.8 billion in 2024 and over 150 Austrian companies operating in India across automotive, railway infrastructure, precision tools, and machinery sectors, the Branch Office structure serves as an effective entry point for Austrian firms exploring the Indian market. Finance Minister Sitharaman has actively invited Austrian companies to invest in India, highlighting opportunities in renewable energy, electric vehicles, and innovative technologies — sectors where Branch Offices can provide critical support functions.

A Branch Office requires prior approval from the Reserve Bank of India (RBI) through an Authorised Dealer (AD) Category-I bank, and its activities are restricted to specific permitted categories. This guide covers the complete process from RBI application to post-establishment compliance.

FDI Route and Regulatory Requirements

Unlike company incorporation, establishing a Branch Office in India requires prior approval from the Reserve Bank of India. The application is routed through an Authorised Dealer Category-I bank using Form FNC.

RBI Approval Process

The Austrian parent company must submit an application in Form FNC to its designated AD Category-I bank in India. The AD bank examines the application, verifies the eligibility criteria, and forwards it to the RBI for approval. Upon approval, the RBI issues a Unique Identification Number (UIN) to the Branch Office.

Eligibility Criteria

Under the RBI's 2025 draft regulations, the earlier minimum net worth thresholds (USD 100,000) and profit track record requirements have been simplified. However, the Austrian parent company should demonstrate:

• A track record of profitable operations
• Sufficient financial strength to support the Indian Branch Office
• A clear business case for establishing presence in India
• That the proposed activities fall within permitted categories

Permitted Activities

A Branch Office in India is permitted to undertake the following activities:

• Export and import of goods
• Rendering professional or consultancy services
• Carrying out research work in which the parent company is engaged
• Promoting technical or financial collaborations between Indian companies and the parent company
• Representing the parent company in India and acting as buying or selling agent
• Rendering services in information technology and development of software
• Providing technical support to the products supplied by the parent company
• Operating as a foreign airline or shipping company

Prohibited Activities

A Branch Office cannot:

• Undertake manufacturing or processing activities in India (unless located in a Special Economic Zone)
• Engage in retail trading activities
• Conduct any activity not listed in the approved categories without prior RBI permission

Press Note 3 — Not Applicable to Austria

Press Note 3 (2020), which imposes additional security screening on investments from countries sharing a land border with India (such as China, Pakistan, and Bangladesh), does not apply to Austria. Austrian companies can proceed through the standard RBI approval process without additional security clearance.

DTAA Benefits for Austrian Investors

The India-Austria Double Taxation Avoidance Agreement, originally signed in Vienna on November 8, 1999, effective since September 5, 2001, and enhanced by an amending protocol effective May 1, 2020, has significant implications for Branch Office taxation because a Branch Office constitutes a Permanent Establishment (PE) of the Austrian parent in India.

Permanent Establishment and Tax Implications

A Branch Office is automatically treated as a Permanent Establishment under both Indian domestic law and the India-Austria DTAA. This means India has the right to tax the business profits attributable to the Branch Office. The Austrian parent company must compute the profits of the Indian Branch Office separately, and these profits are subject to Indian corporate tax.

Tax Rates for Branch Office

• Corporate Tax: A Branch Office (as a foreign company) is taxed at 35% plus applicable surcharge and cess on income attributable to the PE in India.
• Branch Profit Remittance Tax: An additional tax on profits remitted by the Branch Office to the Austrian head office — currently not levied under Indian law, but the Austrian parent should monitor any policy changes.
• Interest received by the BO: Withholding capped at 10% under the DTAA (reduced from the domestic rate of 20%).
• Royalties: Capped at 10% under the DTAA.
• Fees for Technical Services: Capped at 10% under the DTAA.
• Dividends: Capped at 10% under the DTAA.

Double Tax Relief

The Austrian parent company can claim credit in Austria for taxes paid by the Branch Office in India, preventing double taxation. The DTAA primarily uses the credit method for eliminating double taxation — the Austrian parent includes the Branch Office income in its global income and receives a credit for Indian taxes paid. The 2020 protocol enhanced the mutual agreement procedure and aligned exchange of information provisions with international standards.

Transfer Pricing Implications

Transactions between the Austrian head office and its Indian Branch Office must be conducted at arm's length prices, even though they are technically the same legal entity. India's transfer pricing regulations require separate documentation for the attribution of profits to the Branch Office and any charges for head office services, shared costs, or intellectual property usage.

Document Requirements and Authentication

Both Austria and India are members of the Hague Apostille Convention. Austria's apostille provisions entered into force on September 12, 2020. Austrian documents must be apostilled for use in India, which is faster and simpler than embassy attestation.

Documents from the Austrian Parent Company

• Certificate of Registration — Extract from the Austrian Commercial Register (Firmenbuchauszug) — apostilled
• Board resolution (Vorstandsbeschluss) of the Austrian parent authorising the establishment of a Branch Office in India — apostilled
• Articles of Association (Gesellschaftsvertrag / Satzung) — apostilled
• Latest audited financial statements of the Austrian parent (for the preceding 5 years, if available)
• Copy of the Annual Report
• Power of Attorney in favour of the authorised person to represent the Branch Office in India — apostilled
• Details of the parent company's existing branches or subsidiaries in India (if any)
• Activity plan for the proposed Branch Office in India

Documents for RBI Application (Form FNC)

• Completed Form FNC
• Certificate from the Bankers of the applicant company in Austria, confirming the company's financial standing
• Proposed organisational structure of the Branch Office in India
• List of directors and key management personnel of the Austrian parent
• No Objection Certificate from the concerned regulatory authority in Austria (if applicable)

Apostille Process in Austria

Apostilles in Austria are issued by the Federal Ministry for Europe, Integration and Foreign Affairs (BMEIA) for federal-level documents, and by the presidents of civil courts of first instance (Bezirksgerichte) for judicial and notarial documents. Fees are approximately EUR 13.70 at regional courts and EUR 17.50 at the BMEIA. Austria also supports e-Apostilles for electronically signed documents. Processing typically takes 1-3 business days. Documents in German must first be translated into English by a sworn translator (beeideter Übersetzer und Dolmetscher) before apostille.

Step-by-Step Registration Process

The Branch Office setup process involves both RBI approval and Registrar of Companies (ROC) registration.

Step 1: Austrian Parent Board Resolution

The board of directors (Vorstand or Geschäftsführung) of the Austrian parent must pass a formal resolution approving the establishment of a Branch Office in India, specifying the proposed activities, the authorised representative, and the initial funding arrangement. This resolution must be apostilled through the BMEIA or regional court.

Step 2: Submit Form FNC to AD Bank

File the application in Form FNC with an Authorised Dealer Category-I bank in India. The AD bank reviews the application for completeness and forwards it to the RBI. The application must include all parent company documents, activity plan, and banker's certificate.

Step 3: Obtain RBI Approval

The RBI reviews the application and, upon satisfaction, issues an approval letter along with a Unique Identification Number (UIN). The approval letter specifies the permitted activities, any conditions attached, and the validity period. Timeline: 4-8 weeks from submission.

Step 4: Register with Registrar of Companies

Within 30 days of establishing the Branch Office, file Form FC-1 with the Registrar of Companies (ROC) under Section 380 of the Companies Act, 2013. This registration makes the Branch Office's existence a matter of public record. Required documents include the RBI approval letter, charter documents of the Austrian parent, and address proof of the Indian office.

Step 5: Obtain PAN, TAN, and GST Registration

Apply for a Permanent Account Number (PAN) in the name of the Austrian parent company (Indian Branch). Simultaneously apply for TAN (Tax Deduction Account Number) and GST registration if the Branch Office's activities are subject to GST.

Step 6: Open Bank Account

Open a current account with the AD Category-I bank in India. The Austrian parent will fund the Branch Office operations through inward remittances. The bank account will be in the name of the Austrian parent company with a Branch Office suffix.

Step 7: Commence Operations

Once the bank account is operational and all registrations are complete, the Branch Office can commence the approved activities. The office must be established within 6 months from the date of the RBI approval letter.

Timeline and Costs

The Branch Office setup takes longer than company incorporation due to the RBI approval requirement.

Total estimated timeline: 6-10 weeks from document preparation to operational Branch Office.

Total estimated cost: INR 1,50,000-3,50,000 (approximately EUR 1,600-3,800) including government fees, professional fees, AD bank charges, and legal costs. The ongoing operational funding from the Austrian parent is separate.

Post-Registration Compliance

A Branch Office in India has specific ongoing compliance requirements with the RBI, ROC, and Income Tax Department.

Annual RBI Compliance

• Annual Activity Certificate (AAC): Must be submitted along with audited financial statements within 6 months of the end of the financial year. The AAC certifies that the Branch Office has undertaken only permitted activities during the year.
• FLA Return: Annual Return on Foreign Liabilities and Assets, due by July 15.
• Profit remittance: Profits can be remitted to the Austrian parent through the AD bank, subject to tax compliance certificates.

ROC Filings

• Annual return of foreign company: Filed with the ROC annually.
• Financial statements: The Indian Branch Office's accounts, along with copies of the Austrian parent's global financial statements, must be filed with the ROC.
• Any changes: Changes in the parent company's charter, directors, or registered office must be intimated to the ROC within 30 days.

Tax Compliance

• Corporate Tax Return: Filed as a foreign company. The Branch Office income is taxed at 35% plus surcharge and cess.
• GST Returns: Monthly or quarterly depending on turnover.
• TDS Returns: Quarterly filing for all tax deducted at source on payments to employees, contractors, and service providers.
• Transfer Pricing Documentation: Required for transactions between the Branch Office and the Austrian head office, including cost allocations and management charges.
• Advance Tax: Quarterly instalments on June 15, September 15, December 15, and March 15.

Common Challenges for Austrian Companies

Austrian companies setting up a Branch Office in India encounter several country-specific challenges.

Restricted Activity Scope

The most significant limitation of a Branch Office is the restriction on activities. Manufacturing and retail trading are not permitted (unless in an SEZ). Austrian manufacturing companies in automotive, railway infrastructure, and precision tools sectors that need manufacturing capability must establish a separate Indian subsidiary. The Branch Office is best suited for sales, service, consulting, technical support, and import-export functions.

Higher Tax Rate

A Branch Office, treated as a foreign company, is taxed at 35% plus surcharge and cess — significantly higher than the 22-25% corporate tax rate available to domestic Indian companies. For Austrian companies planning long-term, revenue-generating operations in India, a Private Limited Company or LLP may be more tax-efficient.

Unlimited Liability of the Parent

Since a Branch Office is not a separate legal entity, the Austrian parent company bears unlimited liability for the Branch Office's obligations in India. All contracts, debts, and legal claims against the Branch Office are ultimately the responsibility of the Austrian parent. This contrasts with a subsidiary, which provides limited liability protection.

Language and Documentation

Austrian corporate documents are in German. All documents submitted to Indian authorities must be in English. Certified translations by a sworn translator (beeideter Übersetzer und Dolmetscher) are required before notarisation and apostille. Budget 1-2 additional weeks for translation if documents are not already in English.

Time Zone Management

The 3.5-4.5 hour time difference between Austria (CET/CEST) and India (IST) is manageable but requires planning. Board meetings, regulatory filings, and banking operations need coordination across both time zones.

Profit Remittance Documentation

Remitting profits from the Indian Branch Office to Austria requires a certificate from a Chartered Accountant confirming that all tax obligations have been met, the AAC has been filed, and the remittance is from genuine business profits. The AD bank will verify these documents before allowing the remittance. Delays in obtaining these certificates can slow down profit repatriation.

Frequently Asked Questions

Can an Austrian Branch Office in India engage in manufacturing?

No. A Branch Office cannot undertake manufacturing or processing activities in India, unless it is located in a Special Economic Zone (SEZ). Austrian companies requiring manufacturing operations should establish a Private Limited Company or a Wholly Owned Subsidiary.

How is a Branch Office taxed compared to a subsidiary?

A Branch Office is taxed at 35% plus surcharge and cess as a foreign company, while an Indian subsidiary (Private Limited Company) is taxed at 22-25% plus surcharge and cess under the new domestic tax regime. The higher tax rate is a key consideration when choosing between structures.

Can the Branch Office generate revenue in India?

Yes, a Branch Office can generate revenue through its permitted activities — including export/import, consultancy services, IT services, and acting as a buying/selling agent. However, the revenue-generating activities must fall strictly within the approved categories specified in the RBI approval letter.

What is the Annual Activity Certificate (AAC)?

The AAC is a certificate issued by a Chartered Accountant confirming that the Branch Office has conducted only the activities permitted by the RBI during the financial year. It must be submitted to the AD bank along with audited financial statements within 6 months of the financial year end. Non-submission can trigger account freezing and closure proceedings.

Can a Branch Office hire employees in India?

Yes. A Branch Office can hire Indian employees directly. All Indian employment laws apply, including provident fund contributions, gratuity, professional tax, and the four new Labour Codes being implemented. Employment contracts must comply with state-specific shop and establishment regulations.

How long does RBI approval take for Austrian companies?

RBI approval typically takes 4-8 weeks from the date the AD bank forwards the complete application. Austria is not subject to Press Note 3 or any additional security screening, so the approval follows the standard timeline. Having a well-documented activity plan and complete parent company financials speeds up the process.