How to Set Up a Branch Office in India from Japan
A Branch Office (BO) in India is an extension of the foreign parent company — not a separate legal entity. For Japanese companies looking to establish a direct commercial presence in India for export/import operations, professional services, technical support, or liaison activities, a Branch Office provides a cost-effective and operationally simple entry mechanism under the control of the Japanese Honsha (本社 / head office).
Japan has been one of India's most significant economic partners, with cumulative FDI of US $43.28 billion from April 2000 to December 2024 and bilateral trade of approximately US $22.85 billion in FY 2023-24. The India-Japan Comprehensive Economic Partnership Agreement (CEPA), the India-Japan Industrial Competitiveness Partnership, and the Japan Plus initiative have created a highly supportive framework for Japanese businesses entering India.
Unlike a Private Limited Company or LLP, a Branch Office does not require share capital or partner contributions. The Japanese parent funds the BO's operations through inward remittances, and all profits can be repatriated to Japan after paying applicable Indian taxes. Major Japanese corporates including Toyota, Honda, Sony, Hitachi, and Panasonic maintain Branch Offices alongside their Indian subsidiaries for specific business functions.
FDI Route & Regulatory Requirements
Setting up a Branch Office requires prior approval from the Reserve Bank of India (RBI). The application is submitted via Form FNC through an Authorised Dealer (AD) Category-I bank, which forwards it to the RBI for consideration.
Japan does not share a land border with India, so Press Note 3 of 2020 restrictions do not apply to Japanese applicants. Applications from Japanese companies are generally processed through the general permission route.
Eligibility Criteria
Under the current FEMA framework (Regulations, 2016), the Japanese parent company must meet these criteria:
- Profit track record: The parent company must demonstrate profit-making during the immediately preceding 5 financial years
- Net worth: The parent company's net worth must be at least US $100,000 (note: RBI's 2025 draft regulations propose removing this threshold)
Permitted Activities
A Branch Office in India may only engage in activities approved by the RBI:
- Export and import of goods
- Rendering professional or consultancy services
- Carrying out research work in areas 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 a buying/selling agent
- Rendering services in Information Technology and development of software
- Rendering technical support to the products supplied by the parent company
- Foreign airline/shipping company operations
Prohibited Activities
A Branch Office cannot engage in retail trading, manufacturing, or processing activities in India, unless located within a Special Economic Zone (SEZ). Japanese manufacturers seeking production facilities in India should consider a Private Limited Company or a Wholly Owned Subsidiary (WOS).
DTAA Benefits for Japanese Investors
The India-Japan Double Taxation Avoidance Agreement (DTAA), originally signed on 7 March 1989 and in force since 29 December 1989, provides important tax benefits for Branch Office operations. Under the treaty:
- Business profits: Taxed only in Japan unless the BO constitutes a Permanent Establishment (PE) in India — which a Branch Office invariably does, meaning profits attributable to the Indian BO are taxed in India
- Interest: 10% withholding (vs. 20% under domestic law)
- Royalties: 10% withholding
- Fees for Technical Services: 10% withholding
The Branch Office is taxed as a foreign company in India at 35% corporate tax rate (plus surcharge and cess, effective ~38.22%). While this rate is higher than domestic company rates, the India-Japan DTAA ensures credit relief — taxes paid in India are creditable against Japanese corporate tax (Hojin-zei / 法人税) and local inhabitant tax (Jumin-zei / 住民税) obligations through Japan's Gaikoku Zeikin Kojo (外国税額控除 / foreign tax credit) system.
Japanese investors should obtain a Tax Residency Certificate (TRC) from Japan's National Tax Agency (Kokuzei-cho / 国税庁), file Form 10F, and maintain a beneficial ownership declaration to claim treaty benefits.
Document Requirements & Authentication
Japan has been a member of the Hague Apostille Convention since 1970, so all Japanese documents can be authenticated via Apostille. Apostilles in Japan are issued by the Ministry of Foreign Affairs (Gaimu-sho / 外務省) in Tokyo, free of charge — a notable cost advantage over many other jurisdictions.
Documents Required for RBI Application (Form FNC)
- Application in Form FNC, signed by the authorised representative
- Touki Jiko Shomeisho (登記事項証明書 / Certificate of Registered Matters) from the Legal Affairs Bureau, apostilled
- Latest audited balance sheet and profit & loss accounts of the Japanese parent (for the preceding 5 years)
- Board resolution (Torishimariyaku-kai Gijiroku / 取締役会議事録) authorising establishment of the Branch Office in India, notarised and apostilled
- Teikan (定款 / Articles of Incorporation), apostilled
- Details of activities to be carried out in India
- Company profile, including details of existing global offices
- Power of Attorney in favour of the authorised signatory in India, notarised and apostilled
Documents for ROC Registration (Form FC-1)
- Certified copy of the RBI approval letter
- Touki Jiko Shomeisho (Certificate of Registered Matters), apostilled
- Teikan (Articles of Incorporation), apostilled
- List of directors (Torishimariyaku / 取締役) and representative directors of the Japanese parent
- Address proof of the Branch Office in India
- Details of the authorised representative in India
All documents in Japanese must be professionally translated into English by a certified translator, and the translations must also be apostilled.
Step-by-Step Registration Process
Step 1: Prepare and Apostille Documents in Japan (1–2 weeks)
Gather all required corporate documents from the Legal Affairs Bureau (Homu-kyoku / 法務局). Have documents notarised by a Japanese notary (Koshonin / 公証人) and obtain apostilles from the Ministry of Foreign Affairs. The apostille process in Japan is free and typically takes 3–5 working days. Certified English translations must be prepared and separately apostilled.
Step 2: Submit Form FNC to AD Bank (1 week)
Engage an Authorised Dealer Category-I bank in India. Japanese companies often work with banks that have a Japan desk — MUFG Bank (formerly Bank of Tokyo-Mitsubishi UFJ), Mizuho Bank, and SMBC (Sumitomo Mitsui Banking Corporation) all have significant India operations. Submit the completed Form FNC with all supporting documents.
Step 3: RBI Approval (4–8 weeks)
The RBI examines the application, verifying the parent company's financial standing, proposed activities, and compliance with FEMA regulations. Upon approval, the RBI issues a Unique Identification Number (UIN) and an approval letter specifying the permitted activities.
Step 4: Register with ROC — File Form FC-1 (within 30 days)
Within 30 days of receiving RBI approval, file Form FC-1 with the Registrar of Companies (ROC) under Section 380 of the Companies Act, 2013. The ROC filing fee is INR 6,000. The ROC issues a registration certificate and a CIN (Corporate Identity Number) for the branch.
Step 5: Obtain PAN and TAN
Apply for Permanent Account Number (PAN) and Tax Deduction Account Number (TAN). These are mandatory before the branch can commence business operations or open a bank account.
Step 6: Open a Bank Account
Open a bank account in the name of the Branch Office. Japanese companies benefit from using banks with Japan-origin operations in India — MUFG, Mizuho, and SMBC offer dedicated services for Japanese Branch Offices including bilingual support and streamlined KYC processes.
Step 7: GST and Other Registrations
Register for Goods and Services Tax (GST), Shop & Establishment Act registration (state-specific), and any sector-specific licences. For Branch Offices in the IT sector, STPI (Software Technology Parks of India) registration may also be beneficial.
Timeline & Costs
The end-to-end timeline for a Japanese company to set up a Branch Office in India typically ranges from 8 to 12 weeks:
- Document preparation & apostille in Japan: 1–2 weeks
- Form FNC submission to AD bank: 1 week
- RBI processing & approval: 4–8 weeks
- ROC registration (Form FC-1): 1–2 weeks
- PAN, TAN, and bank account: 1–2 weeks
Fee Breakdown
- ROC filing fee (Form FC-1): INR 6,000
- PAN & TAN application: INR 200–500
- GST registration: Free
- Professional fees: INR 50,000–1,50,000 (CA/CS/legal engagement for RBI application)
- Apostille costs in Japan: Free (Ministry of Foreign Affairs)
- Translation costs: JPY 5,000–15,000 per document (certified English translation)
- Total estimated cost: INR 80,000–2,50,000 (approx. JPY 1,40,000–4,50,000)
Post-Registration Compliance
Branch Offices in India must comply with ongoing regulatory obligations:
- Annual Activity Certificate (AAC): Submit to the AD bank by 30 September each year, certified by a Chartered Accountant, confirming the branch has operated within its permitted activities
- Financial statements: File annual accounts with the ROC under Section 381 of the Companies Act, 2013
- Income tax return: File by 31 October (when transfer pricing applies), paying tax at the 35% foreign company rate
- Transfer pricing documentation: Mandatory for all transactions between the Indian BO and the Japanese head office, including management fees, cost allocations, and recharges
- GST compliance: Monthly/quarterly returns based on turnover
- RBI reporting: Any change in activities, address, or authorised representative must be reported to the RBI through the AD bank
- FLA Return: Annual filing with RBI by 15 July
Common Challenges for Japanese Companies
Japanese companies setting up Branch Offices in India should be aware of these specific challenges:
- RBI processing timelines: While standard processing takes 4–8 weeks, applications with incomplete documentation or unusual activity proposals can take 3–4 months. Japanese companies accustomed to faster regulatory approvals should plan accordingly
- Activity restrictions: Branch Offices cannot engage in manufacturing — a significant limitation for Japanese automotive, electronics, and industrial companies. For production facilities, consider a Private Limited Company or utilise the PLI scheme
- Higher tax rate: The 35% foreign company tax rate (effective ~38.22%) is substantially higher than the 22–25% available to domestic companies. For profit-generating operations, a subsidiary structure is typically more tax-efficient
- Time zone coordination: India is 3.5 hours behind Japan (IST vs. JST). The overlapping business window is approximately 10:00 AM – 3:30 PM IST (1:30 PM – 7:00 PM JST), which can slow down approvals and documentation
- Translation requirements: All Japanese-language corporate documents must be professionally translated into English. While apostilles are free, translation costs (JPY 5,000–15,000 per document) and the time involved (1–2 weeks) should be factored into planning
- Profit remittance process: Remitting profits to Japan requires the AD bank to verify tax compliance and obtain a CA certificate. The process typically takes 5–10 business days, and the JPY-INR exchange rate at the time of remittance affects the final amount received
- Closure complexity: Winding up a Branch Office requires RBI permission, NOCs from the Income Tax Department, and can take 6–12 months — Japanese companies should view a BO as a medium- to long-term commitment
Frequently Asked Questions
Can a Japanese Branch Office in India engage in manufacturing?
No, a Branch Office cannot directly engage in manufacturing or processing activities in India, unless located within a Special Economic Zone (SEZ). The branch can, however, subcontract manufacturing to an Indian company and provide technical supervision. For direct manufacturing, Japanese companies should register a Private Limited Company or Wholly Owned Subsidiary.
What is the minimum net worth requirement for the Japanese parent company?
Under current regulations, the Japanese parent must have a net worth of at least US $100,000. The RBI's 2025 draft Foreign Exchange Management Regulations propose removing this threshold. As of March 2026, the draft has not been notified in the Official Gazette, so the existing threshold still applies.
How are Branch Office profits taxed in India?
Branch Office profits are taxed at 35% (the foreign company rate) plus applicable surcharge and health & education cess, resulting in an effective rate of approximately 38.22%. Under the India-Japan DTAA, taxes paid in India are creditable against Japanese corporate tax liabilities through the foreign tax credit system.
Can the Branch Office hire Indian employees?
Yes, the Branch Office can hire Indian employees and must comply with all applicable Indian labour laws, including the Employees' Provident Fund (EPF), Employees' State Insurance (ESI), payment of gratuity, and the recently codified labour codes. The branch is treated as an employer under Indian law.
Is there a time limit to commence operations after RBI approval?
Yes, the Branch Office must commence operations within 6 months of receiving the RBI approval letter. If not established within this period, the approval lapses. A further 6-month extension may be granted on application to the AD bank.
Can a Branch Office be converted into a subsidiary later?
A Branch Office cannot be directly converted into a subsidiary. The Japanese parent would need to incorporate a new Private Limited Company or WOS in India, transfer the BO's business operations to the new entity, and then close the Branch Office through the RBI-prescribed closure process. This transition typically takes 6–12 months.
Do Japanese banks in India facilitate Branch Office operations?
Yes, MUFG Bank, Mizuho Bank, and SMBC (Sumitomo Mitsui Banking Corporation) all operate in India and offer dedicated services for Japanese Branch Offices, including AD bank services for Form FNC submission, bilingual banking support, and streamlined remittance processes to Japan.