How to Set Up a Project Office in India from China
A Project Office (PO) is a temporary business establishment that allows a Chinese company to execute a specific project in India. Unlike a Private Limited Company or Wholly Owned Subsidiary, a project office is tied to a specific project contract — it exists only for the duration of the project and must be closed upon completion.
This structure is commonly used by Chinese companies in infrastructure, construction, engineering, telecommunications, and power projects in India. The project office can carry out the activities specified in the project contract, including execution, supervision, and technical services related to the project.
Critical: China is a Press Note 3 country. Under Press Note 3 (PN3), notified on 17 April 2020, all investments and business establishments from entities sharing a land border with India — including China and Hong Kong — require prior government approval. While a general permission route exists for project offices from most countries, Chinese companies cannot use this route and must obtain specific RBI permission after government security clearance.
Project Office vs. Other Entity Types
A project office differs fundamentally from a liaison office or branch office. While a liaison office cannot engage in commercial activities and a branch office can perform a wider range of ongoing activities, a project office is focused entirely on executing a single specific project. It can earn income and generate profits from that project. For a comparison of all three, see Liaison Office vs. Project Office vs. Branch Office.
FDI Route & Regulatory Requirements
Government approval is mandatory for all Chinese entities. The normal general permission route available to foreign companies from most countries does not apply to Chinese companies.
General Permission (Not Available for China)
RBI grants general permission to foreign companies to establish project offices in India when: (1) the company has secured a contract from an Indian entity, and (2) the project is funded by inward remittance, a bilateral/multilateral international financing agency, a cleared authority, or an Indian company with a term loan from a public financial institution. However, this general permission explicitly excludes companies from China, Hong Kong, Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, and Macau.
Specific Permission Process for Chinese Companies
Chinese companies must follow a two-stage approval process:
Stage 1: Government Security Clearance (MHA)
Before the RBI can process the project office application, Chinese companies must obtain security clearance from the Ministry of Home Affairs (MHA), coordinated through DPIIT. The security clearance evaluates:
- The nature and sector of the proposed project (defence, telecom, and information broadcasting sectors face heightened scrutiny)
- The Chinese parent company's background, ownership structure, and government affiliations
- National security implications, particularly for infrastructure and technology projects
- Whether the project is in a sensitive geographic area (North Eastern states, Jammu & Kashmir, and Andaman & Nicobar Islands require additional approvals)
Stage 2: RBI Specific Permission
After security clearance, the Chinese company applies for specific RBI permission through an Authorized Dealer (AD) bank using Form FNC. The application must include:
- Details of the project contract (parties, value, duration, scope)
- Funding arrangement for the project
- Security clearance letter from DPIIT/MHA
- All authenticated parent company documents
2026 Press Note 3 Relaxations — Limited Impact
The March 2026 partial relaxation of PN3 — allowing investments up to 10% beneficial ownership from land-border countries through the automatic route — has limited applicability to project offices. Chinese companies establishing project offices still require full government security clearance and specific RBI permission. However, project offices in specified manufacturing-support sectors may benefit from expedited 60-day processing.
DTAA Benefits for Chinese Companies
The India-China Double Taxation Avoidance Agreement, signed on 18 July 1994 and amended by protocol on 26 November 2018, has important implications for project offices.
Permanent Establishment Considerations
A project office in India typically constitutes a Permanent Establishment (PE) of the Chinese parent company under the DTAA, particularly if the project duration exceeds 183 days (the construction PE threshold). This means the project office's income is taxable in India, but the Chinese parent can claim a foreign tax credit in China for taxes paid in India.
Key DTAA Tax Rates
| Income Type | Domestic Rate | DTAA Rate | Savings |
|---|---|---|---|
| Interest | 20% | 10% | 10% |
| Royalties | 20% | 10% | 10% |
| Fees for Technical Services | 20% | 10% | 10% |
| Dividends | 20% | 10% | 10% |
Project office profits are taxed at the applicable corporate tax rate for foreign companies in India — currently 35% (reduced from 40% effective AY 2025-26) plus surcharge and cess, resulting in an effective rate of approximately 38.22%. The DTAA ensures the Chinese parent can credit these taxes against its Chinese tax liability.
Document Requirements & Authentication
Document authentication follows the embassy attestation route. Despite China joining the Hague Apostille Convention in November 2023, India's formal objection means the Apostille Convention does not apply between the two countries.
Documents Required for RBI Application
- Project contract with the Indian party — the foundational document, detailing scope, timeline, value, payment terms, and completion criteria
- Board resolution of the Chinese parent company authorizing establishment of a project office in India for the specific project
- Business license (Yingye Zhizhao / Unified Social Credit Code certificate) — notarized and authenticated
- Certificate of incorporation or registration of the Chinese parent company
- Audited financial statements of the Chinese parent company (last 2-3 years)
- Banker's certificate from the parent company's bank confirming good standing
- Power of Attorney in favour of the Indian representative (notarized and authenticated)
- Details of project funding arrangement (inward remittance, bilateral agency, or Indian company term loan)
- Government security clearance letter from DPIIT/MHA
- Passport copies of authorized personnel
Authentication Process (Embassy Legalization)
All Chinese documents must follow the legalization chain: (1) Notarization by a Chinese notary public, (2) Authentication by the provincial/municipal Foreign Affairs Office, (3) Legalization by the Indian Embassy in Beijing or Consulate General in Shanghai or Guangzhou. Chinese-language documents require certified English translation. Allow 3-5 weeks for the complete process.
Step-by-Step Registration Process
Step 1: Secure the Project Contract
The Chinese company must first sign a project contract with an Indian party. The contract must clearly define the project scope, timeline, deliverables, payment terms, and completion criteria. Without a valid project contract, no project office application can proceed.
Step 2: Obtain Government Security Clearance (6-14 Weeks)
Submit an application through DPIIT detailing the Chinese parent company's background, the nature of the project, and security-relevant information. Infrastructure, defence, telecom, and IT projects face heightened scrutiny and longer clearance timelines. Projects in North Eastern states, J&K, or Andaman & Nicobar Islands require additional geographic clearances.
Step 3: Prepare and Authenticate Documents (3-5 Weeks, Parallel)
While awaiting security clearance, begin the document authentication process in China. Run notarization, Foreign Affairs Office authentication, and Indian Embassy legalization in parallel with the security clearance process.
Step 4: File Form FNC for Specific RBI Permission (2-4 Weeks)
Once security clearance is obtained, submit Form FNC with all supporting documents to the RBI through an Authorized Dealer bank. The AD bank reviews the application and forwards it to the RBI for specific permission.
Step 5: Receive RBI Approval
RBI issues an approval letter specifying the permitted activities, the specific project, and the validity period (typically matching the project contract duration). The project office's operations are limited to the approved project.
Step 6: Register with Registrar of Companies (Within 30 Days)
File Form FC-1 with the ROC within 30 days of establishing the project office. The ROC issues a Foreign Company Registration Number (FCRN). Also obtain PAN and TAN for tax purposes.
Step 7: Open Bank Account & Receive Project Funds
Open a bank account with the designated AD bank. The Chinese head office or the Indian contracting party remits project funds. Foreign direct investment must be received within 180 days of registration with advance intimation to the bank.
Step 8: Register with State Police & Report to MHA
As a Chinese entity, complete the mandatory security registration with State Police authorities and report office and banking details to the Ministry of Home Affairs.
Timeline & Costs
Realistic Timeline from China
| Stage | Duration | Notes |
|---|---|---|
| Secure project contract | Variable | Must be in place before applying |
| Government security clearance | 6-14 weeks | Infrastructure/defence projects take longer |
| Document authentication in China | 3-5 weeks | Run parallel with security clearance |
| Form FNC & specific RBI permission | 2-4 weeks | After security clearance |
| ROC registration (Form FC-1) | 1-2 weeks | Within 30 days of establishment |
| PAN/TAN & bank account opening | 2-4 weeks | Enhanced due diligence for Chinese entities |
| State Police & MHA registration | 1-2 weeks | Chinese entities only |
| Total estimated timeline | 12-22 weeks | Document auth runs parallel |
Cost Breakdown
| Expense | Approximate Cost |
|---|---|
| ROC filing fees (Form FC-1) | ₹6,000-₹10,000 |
| Document authentication in China | ₹20,000-₹50,000 |
| Professional fees (CA/CS/legal) | ₹60,000-₹2,00,000 |
| Registered office deposit & rent | Varies by city and project location |
| Annual compliance costs | ₹30,000-₹75,000 |
There is no minimum capital requirement for a project office. However, the project must be funded through an approved mechanism — inward remittance from the Chinese parent, bilateral/multilateral financing, or an Indian company's term loan.
Post-Registration Compliance
Project offices of Chinese companies face extensive compliance obligations:
RBI/FEMA Compliance
- Annual Activity Certificate (AAC): Submit to the AD bank and Directorate General of Income Tax (International Taxation) each year, certified by a chartered accountant. The AAC must confirm that the project office engaged only in activities related to the approved project and that accounts have been audited
- FLA Return: Annual Return on Foreign Liabilities and Assets by 15 July
- FDI reporting: Report FDI received within 30 days through the AD bank
ROC Compliance
- Form FC-4: Annual return of foreign company within 60 days of the financial year close
- Form FC-3: Annual accounts within 6 months of the close of the parent company's financial year
Tax Compliance
- Corporate tax: Foreign company rate of 35% plus surcharge and cess (effective approximately 38.22% from AY 2025-26)
- Income tax return: File ITR-6 by the due date
- Tax audit: Mandatory if gross receipts/turnover exceeds the threshold under Section 44AB
- GST returns: Monthly/quarterly as applicable based on services provided
- TDS returns: Quarterly
- Transfer pricing: Documentation required for transactions between project office and Chinese parent
MHA Reporting
- Annual reporting to Ministry of Home Affairs for entities from land-border countries
- Notification of any changes in project scope, office address, or personnel
Project Completion and Closure
- Upon project completion, the project office must be closed and winding-up proceeds remitted through the AD bank
- Obtain tax clearance certificate and file closure application with the AD bank
- AD bank reports closure to the RBI regional office with all required documentation
Common Challenges for Chinese Companies
1. No General Permission Route — Specific RBI Approval Required
Unlike companies from Japan, Germany, or USA that can establish project offices under RBI's general permission, Chinese companies are explicitly excluded from this route. They must obtain specific RBI permission after government security clearance, adding 8-14 weeks to the process.
2. Sector-Specific Scrutiny
Chinese project offices in infrastructure, telecom, defence, and information broadcasting sectors face heightened security scrutiny. Large-scale infrastructure projects — such as power plants, highways, and telecommunications networks — where Chinese companies have historically been active, are subject to detailed security assessments that can significantly extend approval timelines.
3. Geographic Restrictions
Projects in the North Eastern Region, Jammu & Kashmir, and Andaman & Nicobar Islands require additional geographic clearances beyond the standard MHA security clearance. This further extends the timeline for Chinese companies seeking to execute projects in these regions.
4. Embassy Attestation Bottlenecks
Since apostille does not apply between India and China due to India's formal objection, all documents require traditional consular legalization. The Indian Embassy in Beijing and Consulates in Shanghai and Guangzhou can have backlogs of 2-3 weeks. Plan for this in the project timeline.
5. Higher Tax Rate for Foreign Companies
Project offices of foreign companies are taxed at 35% (effective approximately 38.22% with surcharge and cess from AY 2025-26), compared to the 22-25% rate for Indian-incorporated companies. For large, profitable projects, this tax differential can be significant. Chinese companies executing long-term or multiple projects may consider establishing a Private Limited Company or WOS for better tax efficiency.
6. Closure Complexity
Closing a project office requires RBI approval, tax clearance, and verification that all project obligations are complete. For Chinese entities, the closure process may also involve MHA clearance. Any pending tax assessments or disputes can delay the winding-up process significantly.
Frequently Asked Questions
Can a Chinese company open a project office in India under general permission?
No. Chinese companies are explicitly excluded from RBI's general permission route for project offices. They must obtain government security clearance under Press Note 3 from DPIIT/MHA, followed by specific RBI permission through Form FNC via an Authorized Dealer bank.
What type of contract is required to set up a project office?
The Chinese company must have a valid project contract with an Indian party to execute a specific project in India. The contract must clearly define the project scope, timeline, deliverables, and funding arrangement. Without a project contract, no project office application can proceed.
Is apostille accepted for Chinese documents?
No. India formally objected to China's accession to the Hague Apostille Convention. All Chinese documents must go through embassy attestation — notarization, Foreign Affairs Office authentication, and Indian Embassy/Consulate legalization. Allow 3-5 weeks for the process.
How long does the project office setup take from China?
Realistically, 12-22 weeks. Government security clearance takes 6-14 weeks (longer for infrastructure/defence projects), followed by 2-4 weeks for specific RBI permission, and 2-4 weeks for bank account opening. Document authentication (3-5 weeks) should run parallel.
What is the tax rate for a Chinese project office in India?
Project offices of foreign companies are taxed at 35% on Indian-source income (reduced from 40% effective AY 2025-26), plus surcharge and cess, resulting in an effective rate of approximately 38.22%. The India-China DTAA allows the parent company to claim foreign tax credit in China.
Can a project office be extended beyond the original project duration?
Yes, if the project contract is extended by mutual agreement between the parties. The project office's RBI approval validity is typically linked to the project contract duration. An extension requires notifying the AD bank and, for Chinese entities, may require updated MHA clearance.
What happens when the project is completed?
Upon project completion, the project office must be formally wound up. This involves filing closure applications with the AD bank, obtaining tax clearance, filing final returns, settling all liabilities, and remitting winding-up proceeds to the Chinese parent through the AD bank. The AD bank reports the closure to the RBI regional office.