Set Up a Liaison Office in India from Saudi Arabia

How to Set Up a Liaison Office in India from Saudi Arabia

India and Saudi Arabia share one of the most significant economic partnerships in the Middle East-South Asia corridor. Bilateral trade stood at approximately USD 41.88 billion in FY 2024-25, making Saudi Arabia India's 5th largest trading partner and India Saudi Arabia's 2nd largest trade partner. Saudi Arabia has reaffirmed its commitment to invest USD 100 billion in India, and major Saudi entities including the Public Investment Fund (PIF), ARAMCO, SABIC, and SALIC have already made significant investments across sectors ranging from technology to energy to food security.

For Saudi companies that want to explore the Indian market, assess business opportunities, or build relationships with potential Indian partners before committing to a full commercial presence, a Liaison Office (LO) provides the ideal entry point. A Liaison Office is a representative office that carries out strictly non-commercial activities — it cannot earn revenue, execute contracts, or engage in any trading or commercial operations in India.

The establishment of a Liaison Office requires prior approval from the Reserve Bank of India (RBI), obtained through an Authorised Dealer Category-I (AD Cat-I) bank using Form FNC. Saudi Arabia is not on the restricted countries list under Press Note 3 of 2020, so Saudi applications follow the general permission route with the AD bank, ensuring a streamlined approval process.

A Liaison Office is particularly suitable for Saudi conglomerates exploring India's infrastructure and energy sectors, Saudi investment firms conducting market research, construction companies evaluating Indian project opportunities ahead of establishing a Project Office, and technology firms assessing India's IT ecosystem before setting up a Private Limited Company.

FDI Route and Regulatory Requirements

The establishment of a Liaison Office in India is governed by the Foreign Exchange Management (Establishment in India of a Branch or Office) Regulations, 2016. The RBI's draft 2025 regulations propose further simplification, including removing net worth thresholds and tenure limits.

Key regulatory requirements for Saudi companies:

• RBI approval: Prior approval from the RBI 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 by the AD bank, as Saudi Arabia is not among the countries requiring additional RBI Central Office approval.
• Eligibility criteria: The Saudi parent company must demonstrate a profit-making track record for the preceding three financial years. If the company cannot meet this requirement, a Letter of Comfort from the parent company or group entity that satisfies these criteria can serve as an alternative. The RBI's 2025 draft regulations propose removing the minimum net worth threshold (currently USD 50,000 for Liaison Offices), though as of March 2026, existing criteria remain in effect.
• Permitted activities: A Liaison Office is restricted to non-commercial activities only: representing the parent company in India, promoting export from India and import to India, promoting technical and financial collaborations between the Saudi parent and Indian entities, and acting as a communication channel between the head office and Indian parties.
• Prohibited activities: A Liaison Office cannot earn any income, execute contracts, provide services for consideration, engage in trading, or carry out any commercial activity in India. All operating expenses must be funded entirely through inward remittances from the Saudi head office.
• Press Note 3 exemption: Saudi companies are fully exempt from Press Note 3 restrictions that apply to entities from countries sharing a land border with India.

The initial approval is granted for three years. Extensions are available for subsequent three-year periods through the AD bank with prior RBI approval. The renewal application should be submitted at least 30 days before the current approval expires, accompanied by updated financial statements and an Annual Activity Certificate.

DTAA Benefits for Saudi Investors

The India-Saudi Arabia Double Taxation Avoidance Agreement (DTAA), in force since November 1, 2006, provides important tax benefits relevant to Saudi companies operating in India.

Key DTAA provisions relevant to Liaison Offices:

• Permanent Establishment (PE) risk: A properly operated Liaison Office should not constitute a Permanent Establishment (PE) under the DTAA because it is restricted to preparatory and auxiliary activities. However, if the LO exceeds its permitted scope — by negotiating or concluding contracts, making business decisions, or earning income — it may trigger PE status, exposing the Saudi parent company to Indian taxation on attributable business profits.
• Dividends: 5% withholding tax rate under the DTAA (lower than many other Indian DTAAs), making Saudi Arabia an advantageous jurisdiction for dividend income flows.
• Interest: 10% withholding tax rate on interest payments from India to Saudi Arabia under the DTAA. Government institutions are exempt from tax on interest income.
• Royalties: 10% withholding tax rate on gross royalty payments.
• Fees for Technical Services: No separate FTS provision in the India-Saudi Arabia DTAA. Such income is typically treated as business profits (taxable only if attributable to a PE) or under domestic tax law provisions.
• No business income tax: Since a properly operated Liaison Office does not earn income in India, it should not have taxable business profits. The office must file an income tax return and maintain proper books of accounts to demonstrate this.

Saudi companies should obtain a Tax Residency Certificate (TRC) from the Saudi tax authority (ZATCA — Zakat, Tax and Customs Authority) to claim treaty benefits for any cross-border payments. The favourable 5% dividend rate under the India-Saudi Arabia DTAA is notably lower than the standard treaty rate with many other countries, making Saudi Arabia an attractive investment jurisdiction for India-bound capital.

Document Requirements and Authentication

Saudi Arabia acceded to the Hague Apostille Convention on December 7, 2022, becoming the 122nd member state. This means that from 2023 onwards, documents originating from Saudi Arabia can be authenticated through the simplified apostille process rather than full embassy legalisation. This significantly reduces the time and cost of document preparation for Saudi companies establishing a presence in India.

Documents required for establishing a Liaison Office in India:

• Certificate of incorporation / Commercial Registration: Of the Saudi parent company, apostilled by the Saudi Ministry of Foreign Affairs or designated competent authority
• Memorandum and Articles of Association: Or equivalent constitutional documents (Saudi companies may use the Company's Bylaws or Articles of Establishment), apostilled
• Board resolution: Authorising the establishment of a Liaison Office in India, specifying the liaison activities and the authorised representative, apostilled
• Latest audited financial statements: For the preceding three financial years, demonstrating profitability and financial standing, apostilled
• Power of attorney: In favour of the authorised representative in India, apostilled
• Banker's certificate: From the Saudi company's principal banker, confirming the company's financial standing and transaction history
• Passport and address proof: Of the authorised signatory and the person designated to head the Liaison Office in India
• Form FNC: Completed application form for submission to the AD bank
• Activity plan: Detailed description of proposed liaison activities and business objectives in India

For documents in Arabic, certified English translations must be obtained and notarised in Saudi Arabia before the apostille is affixed. Since Saudi Arabia's accession to the Hague Convention is relatively recent (2022), companies should confirm that their specific competent authority is set up to issue apostilles and allow adequate time for the process.

Step-by-Step Registration Process

Setting up a Liaison Office in India from Saudi Arabia follows a structured regulatory process involving RBI approval and RoC registration.

Step 1: Select an Authorised Dealer Bank

Choose an AD Category-I bank in India to handle the application. Major banks including State Bank of India, HDFC Bank, ICICI Bank, and Axis Bank commonly process Liaison Office applications. The AD bank acts as the intermediary between the Saudi company and the RBI.

Step 2: Prepare and Submit Form FNC

Complete Form FNC with details of the Saudi parent company, proposed liaison activities, office location in India, funding plan (inward remittance commitments), and the authorised representative. Submit the form along with all apostilled supporting documents through the AD bank.

Step 3: Obtain RBI Approval

The RBI reviews the application through the AD bank, verifying the Saudi company's financial track record, proposed activities, and FEMA compliance. For standard Saudi company applications under the general permission route, the AD bank itself can grant approval. Approval is typically valid for an initial three-year period and takes 4-8 weeks.

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

Within 30 days of establishing the Liaison Office, file Form FC-1 with the RoC under Section 380 of the Companies Act, 2013. This form includes details of the Saudi parent company, LO address in India, authorised representative, and a copy of the RBI approval letter.

Step 5: Obtain PAN

Apply for a Permanent Account Number (PAN) using Form 49AA for non-resident entities. Though a Liaison Office typically has no taxable income, PAN is essential for filing tax returns and carrying out banking transactions.

Step 6: Open a Bank Account

Open a current account with the designated AD bank for receiving remittances from the Saudi head office. All Liaison Office expenses — rent, salaries, utilities, travel — must be funded exclusively through inward remittances from the parent company. No other credits are permitted in the account.

Step 7: Obtain Unique Identification Number (UIN)

The RBI allots a UIN to the Liaison Office, serving as the reference number for all regulatory filings. The AD bank reports establishment details to the RBI, which then issues the UIN.

Timeline and Costs

The typical timeline for establishing a Liaison Office in India from Saudi Arabia is 6-10 weeks, driven primarily by the RBI approval process.

Professional fees for the entire Liaison Office setup typically range from INR 40,000 to INR 1,20,000 depending on complexity. Additional ongoing costs include office lease, staffing, and operational expenses — all of which must be funded through inward remittances from Saudi Arabia. Since Saudi Arabia only joined the Apostille Convention in 2022, document apostille timelines may be slightly longer (7-14 days) compared to countries with longer-standing membership.

For professional assistance with setup, consider our Liaison Office registration service.

Post-Registration Compliance

A Liaison Office established by a Saudi company in India must maintain ongoing compliance with both Indian corporate law and FEMA regulations:

• Annual Activity Certificate (AAC): Submit an AAC from the Liaison Office's auditor to the AD bank annually, confirming that only permitted liaison activities are being carried out and all expenses are funded through inward remittances from Saudi Arabia. Non-submission can lead to RBI penalties and complications during renewal.
• Annual Accounts Filing: File financial statements with the RoC within 60 days of the financial year-end using Form FC-3, along with Form FC-4 listing places of business in India. See annual compliance services.
• Income Tax Return: File annually even though the Liaison Office should have no taxable income. The return serves as a declaration of non-commercial operations and is essential for renewal and eventual closure.
• GST Registration: Generally not required since the LO does not provide taxable services. However, if the LO imports services from outside India (triggering reverse charge mechanism), GST registration and filing may be necessary.
• RBI Annual Return on FLA: Annual Return on Foreign Liabilities and Assets, due by 15 July each year.
• Renewal of RBI Approval: Apply for renewal at least 30 days before the three-year approval period expires, submitting updated financial statements, AAC, and justification for continued operations through the AD bank.
• Annual Return with RoC: File Form FC-4 annually with the Registrar of Companies.
• Remittance documentation: Maintain complete records of all inward remittances from the Saudi head office through the AD bank for RBI reporting.

Common Challenges for Saudi Companies

Saudi companies setting up Liaison Offices in India commonly encounter the following challenges:

• No revenue generation: The most significant constraint is that the Liaison Office cannot earn any income in India. Saudi companies that need to invoice clients, execute contracts, or provide commercial services should consider a Branch Office or Private Limited Company.
• PE risk from scope creep: If the Liaison Office gradually expands beyond pure liaison activities — negotiating contracts, earning income, or making binding business decisions — it risks being classified as a Permanent Establishment under the India-Saudi Arabia DTAA. This would subject the Saudi parent company to Indian taxation at the foreign company rate of 35% plus surcharge and cess.
• Recent apostille transition: Since Saudi Arabia only acceded to the Hague Apostille Convention in December 2022, the apostille infrastructure is still relatively new. Saudi companies may experience longer processing times for apostille certificates compared to countries with decades of Hague Convention membership. It is advisable to allow 10-14 days for document apostille in Saudi Arabia.
• Arabic document translation: Corporate documents in Arabic require certified English translations and notarisation before apostille. Given the volume of documents required for Form FNC, translation costs and timelines can be significant — budget approximately SAR 300-800 for translations.
• Three-year renewal cycle: The initial RBI approval is valid for only three years, requiring periodic renewal with updated documentation. While the 2025 draft regulations propose removing this cap, the existing framework creates planning uncertainty for Saudi companies conducting extended market exploration.
• Limited operational flexibility: A Liaison Office cannot hire staff for commercial activities, maintain inventory, or operate beyond representational functions. Saudi companies with complex market exploration needs may find these constraints overly restrictive.
• Conversion to commercial entity: There is no direct mechanism to convert a Liaison Office into a Branch Office, Private Limited Company, or other commercial entity. The Saudi company must separately incorporate the desired entity and then close the LO through the RBI closure process, which can take 3-6 months.
• Time zone coordination: The 2.5-hour time difference between Saudi Arabia (AST/UTC+3) and India (IST/UTC+5:30) is manageable but requires attention for real-time coordination between the head office and the Liaison Office, particularly for banking and regulatory submissions.

Frequently Asked Questions

Can a Saudi Liaison Office earn revenue in India?

No. A Liaison Office is strictly prohibited from earning any income in India. It can only carry out non-commercial liaison activities such as representing the parent company, promoting trade, and facilitating technical or financial collaborations. All expenses must be funded entirely through inward remittances from the Saudi head office. If commercial activity is required, consider a Branch Office or Private Limited Company.

Does Saudi Arabia's recent Hague Convention membership affect the apostille process?

Saudi Arabia acceded to the Hague Apostille Convention in December 2022, and the apostille process is now fully operational. However, since the infrastructure is relatively new, Saudi companies should allow 10-14 days for document apostille, slightly longer than countries with longer-standing membership. The Saudi Ministry of Foreign Affairs and designated competent authorities issue apostille certificates.

What are the DTAA benefits specific to Saudi Arabia?

The India-Saudi Arabia DTAA provides notably favourable rates, including a 5% withholding tax on dividends (lower than most other Indian DTAAs), 10% on interest, and 10% on royalties. There is no separate provision for fees for technical services. Additionally, a properly operated Liaison Office does not create a Permanent Establishment, so the Saudi parent company is not taxed on business profits in India.

How long is the initial RBI approval valid?

The initial approval is valid for three years. Renewal must be applied for at least 30 days before expiry, with updated financial statements and an Annual Activity Certificate submitted through the AD bank. The RBI's 2025 draft regulations propose removing the three-year tenure cap.

Can a Liaison Office be converted to a subsidiary or Branch Office?

There is no direct conversion mechanism. The Saudi company must separately incorporate a Private Limited Company, Wholly Owned Subsidiary, or Branch Office, and then close the Liaison Office through the RBI closure process, which involves obtaining NOCs and filing with the RoC.

What is the Annual Activity Certificate (AAC)?

The AAC is a certificate issued by the Liaison Office's auditor, confirming that the office has only carried out permitted liaison activities and that all expenses have been funded through inward remittances from the Saudi head office. It must be submitted annually to the AD bank. Non-submission is a serious compliance violation.

Is GST registration required for a Saudi Liaison Office?

Generally, no. Since a Liaison Office does not provide taxable services or earn income, GST registration is not required. However, if the LO receives services from outside India that trigger the reverse charge mechanism, GST registration and compliance may be necessary.