Open a Branch Office in India from Saudi Arabia

How to Open a Branch Office in India from Saudi Arabia

India and Saudi Arabia are deepening their economic ties at an unprecedented pace, with bilateral trade reaching USD 41.88 billion in FY 2024-25 and Saudi Arabia committing to invest USD 100 billion in India across energy, infrastructure, and technology sectors. For established Saudi companies, conglomerates, and enterprises seeking to expand their operational footprint in India without creating a separate legal entity, a Branch Office (BO) provides a practical and effective market entry structure.

A Branch Office operates as an extension of the Saudi parent company in India. It is not a separate legal entity — the Saudi parent company bears full responsibility for the branch's activities and obligations. This structure is particularly suitable for Saudi companies looking to carry out export-import operations, provide professional services, represent the parent company as a buying or selling agent, or deliver IT and software services in the Indian market.

Unlike incorporating a Private Limited Company or an LLP, establishing a Branch Office requires prior approval from the Reserve Bank of India (RBI). The application is submitted through an Authorised Dealer Category-I (AD Cat-I) bank using Form FNC. Since Saudi Arabia does not share a land border with India, Saudi companies are exempt from Press Note 3 of 2020 restrictions, and the application is processed under the general permission route.

FDI Route and Regulatory Requirements

The establishment of a Branch Office in India by a Saudi company is governed by the Foreign Exchange Management (Establishment in India of a Branch or Office) Regulations. The RBI has been modernising this framework, with draft 2025 regulations proposing to simplify eligibility requirements and streamline the approval process through AD banks.

Key regulatory requirements for Saudi companies:

• RBI approval: Prior RBI approval is mandatory. The application is filed through an AD Category-I bank using Form FNC. For Saudi companies, the application is processed under the general permission route, as Saudi Arabia is not classified as a country requiring specific RBI Central Office clearance.
• Eligibility criteria: The Saudi parent company must have a track record of profitability for the preceding five financial years and a net worth of at least USD 100,000 (or equivalent). The 2025 draft regulations propose removing these financial thresholds, but the existing requirements remain applicable as of March 2026.
• Permitted activities: A Branch Office can undertake export and import of goods, provide professional or consultancy services, conduct research in areas where the parent company operates, promote technical or financial collaborations between Indian companies and the parent, represent the parent company as a buying or selling agent, provide IT services and software development, and render technical support for parent company products.
• Prohibited activities: A Branch Office cannot engage in manufacturing, processing, or retail trading in India. It cannot carry out any activity beyond what was specifically approved in the RBI permission.
• Press Note 3 exemption: Saudi Arabia does not share a land border with India. Saudi companies are therefore fully exempt from the additional security scrutiny required under Press Note 3 for investors from China, Pakistan, Bangladesh, and other neighbouring countries.
• Operational timeline: The Branch Office must be established and become operational within six months of receiving RBI approval. Failure to do so results in the approval lapsing, unless an extension is obtained through the AD bank.

DTAA Benefits for Saudi Arabian Investors

The India-Saudi Arabia Double Taxation Avoidance Agreement (DTAA), in force since 1 November 2006, is highly relevant for Branch Office operations. A Branch Office constitutes a Permanent Establishment (PE) in India under the treaty, which determines how business profits are allocated and taxed between the two countries.

Key DTAA provisions for Branch Office operations:

• Business profits: Under the DTAA, business profits of the Saudi company are taxable in India only to the extent they are attributable to the Permanent Establishment (Branch Office) in India. Profits not attributable to the Indian PE remain taxable only in Saudi Arabia.
• Dividends: 5% withholding tax on dividends — one of the most favourable rates among India's DTAAs (compared to the domestic rate of 20%).
• Interest: 10% withholding tax (compared to the domestic rate of 20%). Government institutions are exempt from tax on interest income under the treaty.
• Royalties: 10% withholding tax on gross royalty payments.
• FTS: The India-Saudi Arabia DTAA does not include a specific article on Fees for Technical Services. Such income is treated as business profits (taxable if PE exists) or under domestic law rates in the absence of a PE.
• Profit remittance: The Branch Office can remit net profits to the Saudi head office after paying applicable Indian taxes. No additional withholding tax applies on profit remittance by a branch, as the branch profits have already been taxed as business income.

The Branch Office is taxed at the foreign company rate of 35% on net income plus applicable surcharge and health and education cess (effective rate approximately 37.13% to 38.22% depending on income level). This is higher than the domestic company tax rate of approximately 25.17% under Section 115BAA, which is one key reason Saudi companies with long-term plans often prefer a Private Limited Company or Wholly Owned Subsidiary.

The DTAA also covers Zakat — Saudi Arabia's religious obligation — as a covered tax under the agreement. This provides relief in certain cross-border tax computation scenarios for Saudi entities.

Document Requirements and Authentication

Saudi Arabia acceded to the Hague Apostille Convention on 8 April 2022, with the Convention entering into force on 7 December 2022. This development significantly simplifies document authentication for Saudi companies establishing operations in India. Documents originating from Saudi Arabia can now be apostilled rather than requiring full embassy legalisation, reducing processing time by approximately one week.

Documents required for establishing a Branch Office:

• Commercial registration certificate: Issued by the Saudi Ministry of Commerce (equivalent to a certificate of incorporation), apostilled
• Articles of association or constitutional documents: Of the Saudi parent company, apostilled
• Board resolution or management authorisation: Authorising the establishment of a Branch Office in India, specifying the approved activities and the person authorised to head the branch, apostilled
• Audited financial statements: For the preceding five years, demonstrating profitability and net worth compliance, apostilled
• Power of attorney: In favour of the authorised representative in India, apostilled
• Banker's certificate: From the Saudi parent company's principal banker, confirming financial standing and account history
• Passport and address proof: Of the authorised signatory and the person designated to head the Branch Office
• Form FNC: Completed application form for submission to the AD bank

For documents in Arabic, certified English translations must be obtained and notarised in Saudi Arabia before the apostille is affixed. While Saudi Arabia's accession to the Apostille Convention has simplified the process, it is advisable to confirm current apostille procedures with the Saudi Ministry of Foreign Affairs, as implementation details continue to evolve.

Step-by-Step Registration Process

Setting up a Branch Office in India from Saudi Arabia follows a two-stage process: obtaining RBI approval and then completing registration with the Registrar of Companies (RoC).

Step 1: Select an Authorised Dealer Bank

Choose an AD Category-I bank in India that will process the Branch Office application. Banks such as State Bank of India, HDFC Bank, ICICI Bank, and Axis Bank commonly handle these applications. Several Indian banks have relationships with Saudi financial institutions, which can facilitate the process.

Step 2: Prepare and Submit Form FNC

Complete Form FNC with details of the Saudi parent company, proposed activities, intended location in India, and the authorised representative. Submit the form along with all apostilled supporting documents through the AD bank. The AD bank performs initial due diligence and forwards the application to the RBI Foreign Exchange Department.

Step 3: Obtain RBI Approval

The RBI reviews the application, verifying the Saudi company's financial credentials, proposed activities, and FEMA compliance. For standard Saudi company applications, the AD bank can process the approval under the general permission route. The approval process typically takes 4-8 weeks. Upon approval, the RBI issues a letter specifying the approved activities and any conditions.

Step 4: Register with the Registrar of Companies (RoC)

Within 30 days of establishing the Branch Office, file Form FC-1 with the RoC under Section 380 of the Companies Act, 2013. This filing requires details of the Saudi parent company, Branch Office address, authorised representative information, and a copy of the RBI approval letter.

Step 5: Obtain PAN and TAN

Apply for a Permanent Account Number (PAN) through Form 49AA (for non-resident entities) and a Tax Deduction Account Number (TAN) through Form 49B for the Branch Office.

Step 6: Open a Bank Account

Open a current account with the AD bank for receiving remittances from the Saudi head office and conducting day-to-day operations. The Branch Office operates through an Indian Rupee current account. Saudi companies with significant forex operations can also maintain a foreign currency account with the AD bank.

Step 7: Obtain Unique Identification Number (UIN)

The RBI allots a Unique Identification Number (UIN) to the Branch Office, which serves as the reference for all future regulatory filings. The AD bank reports the establishment details to the RBI, which then issues the UIN.

Timeline and Costs

The typical timeline for setting up a Branch Office in India from Saudi Arabia is 6-10 weeks, longer than company incorporation due to the mandatory RBI approval process.

Professional fees for the entire Branch Office setup typically range from INR 50,000 to INR 1,50,000 depending on the complexity and the service provider. Additional costs include securing office premises, staffing, and initial operational expenses. The Branch Office must receive operating funds from the Saudi head office to cover setup costs.

Popular locations for Saudi companies establishing Branch Offices in India include Mumbai (financial hub, oil and energy sector presence), Delhi-NCR (government relations, large Saudi community), Bengaluru (technology and IT services), and Gujarat (petrochemicals and manufacturing). For assistance, see our Branch Office registration service.

Post-Registration Compliance

A Branch Office in India has substantial ongoing compliance requirements under both the Companies Act, 2013, and FEMA regulations:

• Annual Accounts Filing: File the Branch Office's financial statements with the RoC within 60 days of the financial year end using Form FC-3, along with a list of places of business using Form FC-4. See annual compliance services.
• Income Tax Return: Taxed as a foreign company at 35% plus applicable surcharge and cess. The tax return must be filed by 31 October each year (or the extended due date).
• Transfer Pricing: Transactions between the Branch Office and the Saudi parent company must comply with transfer pricing regulations under Section 92 of the Income Tax Act. All intercompany transactions must be at arm's length.
• GST Returns: Monthly or quarterly GST filings depending on turnover, if the branch provides taxable services or goods.
• RBI Annual Activity Certificate (AAC): The Branch Office must submit an Annual Activity Certificate from its auditor to the AD bank, confirming that only permitted activities are being carried out and all RBI conditions are being met.
• RBI Annual Return on Foreign Liabilities and Assets (FLA): Due by 15 July each year.
• Annual Return with RoC: File Form FC-4 annually.
• Profit Remittance: Net profits can be remitted to the Saudi head office through the AD bank after Indian tax payment, supported by an auditor's certificate confirming tax compliance.

Common Challenges for Saudi Arabian Companies

Saudi companies establishing Branch Offices in India frequently encounter the following challenges:

• Extended RBI approval timeline: The approval process can take 4-8 weeks, and complex applications or those involving sensitive sectors may take longer. Saudi companies should initiate the process well in advance of their planned operational start date and maintain regular follow-up with the AD bank.
• Restricted activity scope: A Branch Office is limited to the specific activities approved by the RBI. Any change or addition of activities requires fresh approval. Saudi companies that need broader operational flexibility should consider a Private Limited Company or Wholly Owned Subsidiary.
• Higher tax rate: The foreign company tax rate of 35% (plus surcharge and cess) is substantially higher than the 22% domestic company rate under Section 115BAA. For long-term operations generating significant profits, a subsidiary structure may be more tax-efficient.
• No separate legal identity: The Saudi parent company is fully liable for all obligations of the Branch Office. Any contractual disputes, regulatory penalties, or litigation involving the branch directly impact the parent company's assets and reputation.
• Five-year profitability requirement: The eligibility requirement for five consecutive years of profitability can be a barrier for newer Saudi companies or those that have experienced recent losses. Companies not meeting this criterion may need to explore alternative structures such as a liaison office or project office.
• Arabic document translation: All Arabic documents require certified English translations before apostille. Translation of complex financial statements and legal documents can take 7-10 days and requires translators familiar with financial and legal terminology.
• Apostille familiarity: Since Saudi Arabia only joined the Apostille Convention in December 2022, some Indian regulatory offices and banks may be less familiar with Saudi apostilled documents compared to those from countries that have been members for decades. Carrying additional authenticated copies is advisable.
• Banking and remittance coordination: Remittances from Saudi Arabia to India and profit repatriation require compliance with both Indian FEMA regulations and Saudi Arabia's SAMA (Saudi Central Bank) foreign exchange rules. Coordinating between Saudi and Indian banks can add complexity to the remittance process.
• Closure complexity: Closing a Branch Office requires RBI permission, settlement of all tax liabilities, and can take 6-12 months. Saudi companies should carefully assess the commitment level before choosing a Branch Office over shorter-term options like a project office or liaison office.

Frequently Asked Questions

Can a Saudi Branch Office engage in manufacturing in India?

No. A Branch Office in India is prohibited from engaging in manufacturing or processing activities directly. It may subcontract manufacturing to an Indian manufacturer. Saudi companies seeking to manufacture in India should register a Private Limited Company or a Wholly Owned Subsidiary.

What is the tax rate for a Branch Office in India?

A Branch Office is taxed as a foreign company at 35% on net income, plus applicable surcharge (2% for income exceeding INR 1 crore, 5% for income exceeding INR 10 crore) and 4% health and education cess. The effective rate ranges from approximately 37.13% to 38.22%.

Does a Saudi company need RBI approval for a Branch Office?

Yes. Prior RBI approval is mandatory. The application is submitted via an Authorised Dealer Category-I bank using Form FNC. For Saudi companies, the application is typically processed under the general permission route by the AD bank. Approval takes 4-8 weeks.

Can the Branch Office remit profits to Saudi Arabia?

Yes. The Branch Office can remit net profits to the Saudi head office after payment of all Indian taxes. Remittance is made through the AD bank with an auditor's certificate confirming tax compliance. No additional withholding tax applies on branch profit remittances, as the income has already been taxed in India.

How long is the RBI approval valid?

The RBI approval is valid for six months. The Branch Office must be established and become operational within this period. If not opened, the approval lapses unless an extension is granted through the AD bank.

Does Saudi Arabia's apostille membership apply to Branch Office documents?

Yes. Since Saudi Arabia acceded to the Hague Apostille Convention in December 2022, all Saudi documents for Branch Office registration can be apostilled instead of requiring embassy attestation. This simplifies and accelerates the documentation process.

What is the difference between a Branch Office and a Liaison Office?

A Branch Office can carry out commercial activities (export-import, professional services, IT services) and earn income in India, while a Liaison Office is limited to non-commercial activities such as market research, promoting business interests, and acting as a communication channel. A Liaison Office cannot earn any income in India. The choice depends on whether the Saudi company intends to generate revenue from its Indian operations.