How to Set Up a Branch Office in India from Malaysia
A Branch Office (BO) is a popular choice for Malaysian companies that want to establish a direct presence in India without incorporating a separate legal entity. Unlike a Private Limited Company or LLP, a Branch Office is not a standalone Indian entity — it is an extension of the Malaysian parent company and operates under its name, credit, and liability.
Malaysia is India's 3rd largest ASEAN trading partner, with bilateral trade reaching USD 19.86 billion in FY 2024-25. The India-Malaysia Comprehensive Economic Cooperation Agreement (MICECA), in force since July 2011, facilitates trade and investment flows across goods, services, and investments. Malaysian companies in sectors such as palm oil, petroleum, banking, telecommunications, and IT services have used the Branch Office structure to test the Indian market before committing to a full subsidiary.
A Branch Office can engage in specific commercial activities permitted by the RBI, including export/import of goods, professional or consultancy services, IT services, research work, and acting as a buying or selling agent for the parent company. However, it cannot undertake retail trading or manufacturing activities in India (unless located in a Special Economic Zone).
FDI Route and Regulatory Requirements
Establishing a Branch Office in India requires prior approval from the Reserve Bank of India (RBI) through the submission of Form FNC (formerly FNC-1) via an Authorised Dealer (AD) Category-I Bank. The approval route depends on the sector in which the parent company operates.
AD Bank Approval (Automatic Route)
When the principal business of the Malaysian parent company falls under sectors where 100% FDI is allowed under the automatic route, the AD Bank can grant approval directly without referring the application to the RBI. This significantly expedites the process and covers the vast majority of Malaysian applications in sectors such as IT, consulting, trading, and professional services.
RBI Approval (Government Route)
If the parent company's business falls under sectors requiring the Government Approval Route or if the company does not meet the eligibility criteria, the application is forwarded by the AD Bank to the RBI for processing. This route typically takes 4-8 additional weeks.
Eligibility Criteria
The Malaysian parent company must meet the following eligibility requirements:
- Profit-making track record in the immediately preceding 5 financial years in Malaysia
- Net worth of not less than USD 100,000 (approximately MYR 440,000 at current rates)
- If the parent company does not meet these criteria, a Letter of Comfort from the ultimate parent company (if applicable) that does meet the requirements is acceptable
Press Note 3 — Not Applicable
Malaysia is not subject to Press Note 3 restrictions. Malaysian companies can establish Branch Offices in India without any additional government security clearance, unlike companies from China, Pakistan, or Bangladesh.
DTAA Benefits for Malaysian Investors
The India-Malaysia DTAA, originally signed on 25 October 1976 and comprehensively revised on 9 May 2012 (effective 1 January 2013), has specific implications for Branch Offices, since a Branch Office typically constitutes a Permanent Establishment (PE) of the Malaysian parent in India.
Tax Treatment of Branch Office Profits
Profits attributable to the Indian Branch Office are taxable in India at the applicable corporate tax rate (currently 35% for foreign companies plus applicable surcharge and cess, resulting in an effective rate of approximately 38.22%). However, the DTAA ensures that:
- Interest income: Withholding tax capped at 10% of the gross amount (compared to 20% domestic rate), with interest earned by government institutions exempt
- Royalties and FTS: Capped at 10% of the gross amount
- India's right to tax is limited to profits directly attributable to the Branch Office's activities, not the global profits of the Malaysian parent
The Branch Office must obtain a Tax Residency Certificate from LHDN (Inland Revenue Board of Malaysia) and file Form 10F in India to claim DTAA benefits.
5% Dividend Advantage
While Branch Offices do not pay dividends (they remit profits), if the Malaysian parent later converts the Branch Office to a Wholly Owned Subsidiary, it can benefit from the India-Malaysia DTAA's exceptionally low 5% dividend withholding rate — one of the most favourable in India's treaty network.
Document Requirements and Authentication
Malaysia acceded to the Hague Apostille Convention with effect from 16 December 2024. Malaysian public documents now require a single apostille issued by the Ministry of Foreign Affairs (Wisma Putra) in Putrajaya, replacing the earlier multi-step embassy legalisation process. An apostilled document is directly accepted in India without further consular attestation by the Indian High Commission.
Documents Required from Malaysia
- Certificate of Incorporation and SSM (Suruhanjaya Syarikat Malaysia) company profile of the Malaysian parent — notarised and apostilled by Wisma Putra
- Memorandum and Articles of Association (Constitution) — notarised and apostilled
- Board Resolution approving the establishment of a Branch Office in India and appointing an authorised representative — notarised and apostilled
- Audited Financial Statements for the last 5 financial years — notarised and apostilled
- Power of Attorney authorising a person in India to represent the company
- Passport copies and address proof of the authorised representative — notarised and apostilled
- Letter of Comfort from the parent company (if applicable)
Documents Required in India
- Proof of registered office address in India (rental agreement or sale deed plus NOC from owner)
- Details of proposed activities to be undertaken
- Projected financials for the Branch Office for the next 3-5 years
Step-by-Step Registration Process
Step 1: Document Preparation and Apostille in Malaysia (5-7 Working Days)
Prepare and authenticate all required documents: notarisation by a Malaysian Notary Public, followed by apostille from Wisma Putra (Ministry of Foreign Affairs) in Putrajaya. Since Malaysia joined the Hague Apostille Convention (effective 16 December 2024), the single apostille replaces the earlier embassy legalisation route.
Step 2: File Form FNC with AD Bank (1-2 Working Days for Submission)
Submit the completed Form FNC application along with all attested documents to a designated AD Category-I Bank in India. The AD Bank reviews the application for completeness before processing or forwarding to the RBI.
Step 3: RBI/AD Bank Approval (2-6 Weeks)
If the Malaysian parent's business falls under the automatic route, the AD Bank can grant approval within 2-3 weeks. If the application is forwarded to the RBI, processing takes 4-8 weeks. The RBI issues a unique identification number (UIN) for the Branch Office upon approval.
Step 4: ROC Registration — Form FC-1 (Within 30 Days of Approval)
Within 30 days of receiving RBI/AD Bank approval, register the Branch Office with the Registrar of Companies by filing Form FC-1 under Section 380 of the Companies Act, 2013. The prescribed fee is INR 6,000. Attach all attested documents.
Step 5: Obtain PAN and TAN (1-2 Weeks)
Apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) from the Income Tax Department. These are mandatory for filing tax returns and deducting TDS.
Step 6: Open Bank Account (2-3 Weeks)
Open a bank account with the designated AD Category-I Bank. The Malaysian parent company remits the initial operating funds to this account. The bank issues an FIRC for the inward remittance.
Step 7: GST and Other Registrations (1-2 Weeks)
Register for GST (if applicable), Professional Tax, and other state-level registrations based on the Branch Office's activities and location.
Timeline and Costs
Realistic Timeline from Malaysia
- Document preparation and apostille (Malaysia): 5-7 working days
- Form FNC filing and AD Bank/RBI approval: 2-6 weeks
- ROC registration (Form FC-1): 3-5 working days
- PAN and TAN: 1-2 weeks
- Bank account opening: 2-3 weeks (can overlap)
- Total: 6-12 weeks end-to-end
Fee Breakdown
- ROC filing fee (Form FC-1): INR 6,000
- Apostille charges (Malaysia): MYR 60 per document (Wisma Putra, Putrajaya)
- AD Bank processing charges: varies by bank (typically INR 10,000-25,000)
- Professional fees (CA/CS): INR 30,000-75,000
- PAN and TAN application: INR 200 each
- Registered office rent: INR 10,000-50,000/month depending on city
Unlike a Private Limited Company, a Branch Office does not have an authorised capital or share capital. Funds are remitted by the parent company as needed to cover operating expenses.
Post-Registration Compliance
Branch Offices in India have significant ongoing compliance obligations with both the RBI and the ROC:
- Annual Activity Certificate (AAC): a certificate from a practising Chartered Accountant confirming that the Branch Office's activities are in accordance with the RBI approval, filed by 30 September each year through the AD Bank
- Audited Financial Statements: filed annually with the RBI (through the AD Bank) and the Director General of Income Tax (International Taxation)
- Form FC-3 (Annual Return): filed with the ROC within 60 days of the financial year-end under the Companies Act, 2013
- Form FC-4 (Financial Statements): filed with the ROC within 6 months of the financial year-end
- Income Tax Return: filed by 31 October each year
- GST Returns: monthly GSTR-1 and GSTR-3B if registered
- Transfer Pricing Documentation: required for transactions between the Branch Office and the Malaysian parent
- FLA Return: annual filing with the RBI by 15 July
Profit Remittance
Branch Offices are permitted to remit profits to the Malaysian parent company through the AD Bank, subject to the following conditions: a certified copy of the audited Balance Sheet and Profit and Loss account, a CA certificate confirming the remittable profit has been earned from permitted activities, and that no revaluation gains are included. Indian taxes (35% + surcharge + cess) must be paid before remittance.
Common Challenges for Malaysian Companies
Apostille Authentication
Malaysia's accession to the Hague Apostille Convention (effective 16 December 2024) has streamlined document authentication significantly. Malaysian companies now follow the same single-step apostille process used by Singaporean and Australian companies: notarise the document locally, then obtain an apostille from Wisma Putra in Putrajaya. Plan for 5-7 working days for this stage and begin document preparation at least 1-2 weeks before your target filing date.
Activity Restrictions
A Branch Office is restricted to the specific activities approved by the RBI. It cannot undertake retail trading, manufacturing, or processing in India (exception: SEZ-located branches). If your Malaysian company plans to manufacture in India, a Private Limited Company or LLP is the appropriate structure.
Higher Tax Rate
Branch Offices of foreign companies are taxed at 35% (plus surcharge and cess, effective ~38.22%), compared to 22-25% for Indian domestic companies. This higher rate can significantly impact profitability. Many Malaysian companies eventually convert their Branch Office to a wholly owned subsidiary to benefit from the lower domestic tax rate and the exceptionally low 5% dividend withholding rate under the India-Malaysia DTAA.
5-Year Profit Track Record
The requirement for a 5-year profit-making track record can be challenging for relatively new Malaysian companies, including startups and SMEs. If your company does not meet this criterion, you can provide a Letter of Comfort from a qualifying parent company, or consider alternative structures like a Private Limited Company or Liaison Office.
Annual Activity Certificate Scrutiny
The RBI closely monitors Branch Office activities through the Annual Activity Certificate (AAC). If the Branch Office engages in activities beyond those approved, it may face penalties or closure orders. Ensure your operational scope aligns strictly with the RBI approval letter.
Frequently Asked Questions
Can a Malaysian Branch Office in India engage in manufacturing?
No. A Branch Office is not permitted to undertake manufacturing or processing activities in India, unless it is located within a Special Economic Zone (SEZ). For manufacturing, consider establishing a Private Limited Company or a Wholly Owned Subsidiary.
What is the minimum net worth required for a Malaysian company to open a Branch Office in India?
The Malaysian parent company must have a net worth of at least USD 100,000 (approximately MYR 440,000) and a profit-making track record for the preceding 5 financial years. If the parent does not meet these criteria, a Letter of Comfort from a qualifying ultimate parent company may suffice.
How is a Branch Office different from a Liaison Office?
A Branch Office can engage in commercial activities such as export/import, trading, and professional services. A Liaison Office is limited to non-commercial activities like market research and communication between the parent and Indian parties. Branch Offices can generate revenue in India; Liaison Offices cannot.
Can a Branch Office remit profits to Malaysia?
Yes. After paying Indian income tax (effective rate ~38.22% for foreign companies), the Branch Office can remit net profits to the Malaysian parent through the AD Bank. A CA certificate confirming the profit was earned from permitted activities is required.
How long does it take to set up a Branch Office from Malaysia?
The process typically takes 6-12 weeks, including apostille of documents in Malaysia (5-7 days), Form FNC filing and RBI/AD Bank approval (2-6 weeks), ROC registration (3-5 days), and bank account opening (2-3 weeks, can overlap with ROC registration). Timelines have tightened since Malaysia joined the Hague Apostille Convention on 16 December 2024.
Does a Branch Office need a separate PAN in India?
Yes. The Branch Office must obtain its own Permanent Account Number (PAN) for income tax purposes. It must also obtain a TAN for deducting TDS on payments to vendors, employees, and other parties.
Can a Branch Office be converted into a Private Limited Company?
Yes. A Branch Office can be converted into a Private Limited Company or Wholly Owned Subsidiary, but this requires RBI approval, fresh incorporation, transfer of assets and liabilities, and closure of the Branch Office. The process typically takes 3-6 months. Converting to a subsidiary also unlocks the 5% DTAA dividend rate.