Set Up a Project Office in India from Japan

How to Set Up a Project Office in India from Japan

A Project Office (PO) is a temporary establishment that a foreign company sets up in India to execute a specific project awarded by an Indian entity. Unlike a Branch Office or Private Limited Company, a Project Office is tied to the life of the project — once the project is completed and all obligations are discharged, the PO must be wound up.

For Japanese companies, the Project Office is an exceptionally relevant vehicle. Japan is India's largest bilateral development partner, with cumulative ODA commitments exceeding US $48.98 billion through JICA (Kokusai Kyōryoku Kikō / 国際協力機構). As of 2025, 77 ongoing JICA-funded projects are being executed across India — spanning metro rail networks, dedicated freight corridors, the Mumbai-Ahmedabad High-Speed Rail (bullet train), water supply, sewerage, and renewable energy.

Japanese construction, engineering, and infrastructure companies — including firms like Taisei Corporation, Obayashi Corporation, Shimizu Corporation, and L&T-MHPS — regularly establish Project Offices to execute these JICA-funded and privately awarded contracts. With 1,434 Japanese companies operating across 5,205 establishments in India and bilateral FDI of US $43.2 billion through December 2024, the PO is a proven mechanism for Japanese firms entering Indian infrastructure projects.

FDI Route & Regulatory Requirements

The regulatory pathway for a Project Office is considerably simpler than for a Branch Office or Liaison Office. The RBI has granted general permission to foreign companies to establish Project Offices in India, provided certain conditions are met.

General Permission Route (No Prior RBI Approval Needed)

A Japanese company can set up a Project Office under the RBI's general permission route if any one of the following conditions is satisfied:

• The project is funded directly by inward remittance from the Japanese parent company
• The project is funded by a bilateral or multilateral international financing agency — this is particularly relevant for Japanese firms, as JICA-funded projects automatically qualify under this condition
• The project has been cleared by an appropriate authority in India
• The Indian company awarding the contract has obtained a term loan from a Public Financial Institution (PFI) or a scheduled bank in India for the project

Under the general permission route, the Japanese company informs the AD bank, which allocates a Unique Identification Number (UIN) and processes the registration directly. No prior RBI approval is required — a major advantage for Japanese firms executing time-sensitive infrastructure contracts.

Specific Permission Route

If none of the general permission conditions are met — for example, a privately funded project where the Indian counterparty does not have bank financing — the Japanese company must apply to the RBI Central Office through the AD bank for specific permission. This route takes 6–10 weeks.

Japan does not share a land border with India, so Press Note 3 of 2020 restrictions do not apply to Japanese applicants.

Scope of Activities

A Project Office can only undertake activities related to the specific project for which it has been established. It cannot take on additional projects without separate registration. If a Japanese company is executing multiple contracts in India — common for large Japanese construction groups — it must establish separate Project Offices for each project and maintain independent books of accounts for each, as mandated by the RBI's 2025 draft regulations.

DTAA Benefits for Japanese Investors

The India-Japan Double Taxation Avoidance Agreement (DTAA), originally signed in 1989 and subsequently revised, provides critical tax protections for Japanese companies executing projects in India.

• Business profits: A Project Office constitutes a Permanent Establishment (PE) in India under Article 5 of the DTAA. Profits attributable to the Indian PO are taxable in India at the 35% foreign company tax rate (effective ~38.22% with surcharge and cess)
• Construction PE threshold: Under the India-Japan DTAA, a building site or construction/installation project constitutes a PE only if it lasts more than 6 months. Short-duration projects may avoid PE status entirely
• Interest: 10% withholding rate (vs. 20% under domestic law)
• Royalties: 10% withholding rate
• Fees for Technical Services (FTS): 10% withholding rate

The DTAA ensures credit relief — taxes paid in India on project income are creditable against Japanese corporate tax (hōjinzei / 法人税), prefectural tax, and municipal tax, preventing double taxation. Japanese companies must obtain a Tax Residency Certificate (TRC) from the National Tax Agency (Kokuzei-chō / 国税庁) and file Form 10F with Indian tax authorities to claim treaty benefits.

Document Requirements & Authentication

Japan has been a member of the Hague Apostille Convention since 1970. All Japanese documents for the Project Office registration can be authenticated via Apostille — issued free of charge by the Ministry of Foreign Affairs of Japan (Gaimushō / 外務省). No embassy attestation or consular legalisation is required.

Documents Required for AD Bank Registration

• Certificate of Incorporation or extract from the Tōkibo (登記簿 / Corporate Registry), apostilled
• A copy of the project contract awarded by the Indian entity (or JICA loan agreement documentation)
• Board resolution (torishimariyakukai gijiroku / 取締役会議事録) authorising establishment of the Project Office, notarised and apostilled
• Articles of Incorporation / teikan (定款), apostilled
• Evidence of project funding — proof of inward remittance, JICA financing confirmation, government clearance, or Indian bank term loan sanction letter
• Company profile and details of previous projects executed globally
• Power of Attorney in favour of the authorised signatory in India, notarised and apostilled
• Banker's report from the Japanese parent's bank

Documents for ROC Registration (Form FC-1)

• Copy of the AD bank's UIN allocation or RBI approval letter
• Certificate of Incorporation or Tōkibo extract, apostilled
• Articles of Incorporation / teikan, apostilled
• Address proof of the Project Office premises in India
• Details of the authorised representative resident in India

All documents in Japanese must be translated into English by a certified translator. Japan's free apostille service is a significant cost advantage — reducing document authentication expenses compared to many other jurisdictions.

Step-by-Step Registration Process

Step 1: Secure the Project Contract

The Japanese company must have a valid project contract from an Indian entity or be named as the executing agency for a JICA-funded project. The contract should clearly define the project scope, timeline, value, and funding source.

Step 2: Prepare and Apostille Documents in Japan (1–2 weeks)

Gather corporate documents, have the board resolution and Power of Attorney notarised by a Japanese notary public (kōshōnin / 公証人), and obtain apostilles from the Ministry of Foreign Affairs in Tokyo. Arrange certified English translations.

Step 3: Register with AD Bank (1–2 weeks)

Approach an Authorised Dealer Category-I bank in India — Japanese banks with India operations such as MUFG Bank, SMBC, or Mizuho Bank are ideal choices. Submit all documents with proof that the general permission conditions are met. The AD bank allocates a Unique Identification Number (UIN) directly.

Step 4: Register with ROC — File Form FC-1 (within 30 days)

Within 30 days of establishing the Project Office, file Form FC-1 with the Registrar of Companies (ROC) under Section 380 of the Companies Act, 2013. The filing fee is INR 6,000.

Step 5: Obtain PAN and TAN

Apply for Permanent Account Number (PAN) and Tax Deduction Account Number (TAN) from the Income Tax Department. Both are required before the Project Office can commence operations.

Step 6: Open a Bank Account

Open a project-specific bank account with the AD bank. All project-related inward remittances and local receipts are routed through this account. For JICA-funded projects, the account structure may need to align with JICA's disbursement procedures.

Step 7: GST and Other Registrations

Register for Goods and Services Tax (GST) if the project involves supply of goods or services. Obtain sector-specific clearances — environmental clearances (for infrastructure projects), electrical contractor licences, or construction permits as required.

Timeline & Costs

The end-to-end timeline for a Japanese company to set up a Project Office varies by permission route:

General Permission Route: 4–6 weeks

• Document preparation & apostille in Japan: 1–2 weeks
• AD bank registration & UIN allocation: 1–2 weeks
• ROC registration (Form FC-1): 1 week
• PAN, TAN, and bank account: 1 week

Specific Permission Route: 8–12 weeks

• Document preparation & apostille: 1–2 weeks
• AD bank submission to RBI: 1 week
• RBI processing & approval: 4–8 weeks
• ROC registration, PAN, TAN, bank: 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)
• Apostille costs in Japan: Free
• Translation costs: JPY 5,000–15,000 per document (approximately INR 2,800–8,400)
• Notarisation in Japan: JPY 5,000–11,500 per document
• Total estimated setup cost: INR 1,00,000–3,00,000 (approx. JPY 175,000–525,000)

Japan's free apostille service provides a cost advantage over many other jurisdictions where apostille fees apply.

Post-Registration Compliance

Project Offices in India must comply with ongoing regulatory obligations throughout the project duration:

• Annual Activity Certificate (AAC): Submit to the AD bank as of 31 March each year, certified by a Chartered Accountant, with a copy endorsed to the Director General of Income Tax (International Taxation), New Delhi
• Project-wise disclosures: If the Japanese company operates multiple Project Offices in India, separate books of accounts and project-wise disclosures must be maintained for each
• Income tax return: File annually — project profits are taxed at the 35% foreign company rate (effective ~38.22%). Due date is 31 October when transfer pricing provisions apply
• Transfer pricing documentation: Mandatory for all transactions between the Indian PO and the Japanese head office — including cost allocations, equipment transfers, management charges, and technical services
• GST compliance: Monthly or quarterly returns based on the nature of supplies
• FLA Return: Annual filing with the RBI by 15 July
• Tax audit: If gross receipts or turnover exceed INR 10 crore (approximately JPY 1.75 billion), tax audit under Section 44AB is mandatory
• JICA reporting: For JICA-funded projects, additional financial reporting and audit requirements under JICA's procurement guidelines apply

Common Challenges for Japanese Companies

Japanese companies establishing a Project Office in India should anticipate these specific challenges:

• Single-project limitation: Each Project Office is tied to one contract. Japanese construction groups winning multiple Indian projects (common for firms involved in metro rail, highways, or power generation) must register separate POs for each — adding compliance overhead. A Branch Office may be more efficient for multi-project engagement
• JICA procurement compliance overlap: For JICA-funded projects, the Japanese company must comply with both Indian regulatory requirements (RBI, ROC, Income Tax) and JICA's procurement guidelines, audit requirements, and disbursement procedures. This dual compliance framework can be complex and requires dedicated coordination
• Closure after project completion: Winding up a Project Office after the contract ends requires an auditor's certificate, settlement of all Indian tax liabilities, NOCs from the Income Tax Department, submission of all pending AACs, and remittance of winding-up proceeds through the AD bank. The process typically takes 4–8 months and can delay repatriation of profits
• Tax rate disadvantage: The 35% foreign company tax rate (effective ~38.22%) is substantially higher than the 22–25% domestic company rate. For long-duration projects spanning several years, the Japanese company should evaluate whether incorporating a Private Limited subsidiary offers better tax efficiency
• AAC non-filing penalties: Failure to submit the Annual Activity Certificate for 3 consecutive years triggers automatic closure proceedings by the AD bank, with reporting to the RBI, Enforcement Directorate, and ROC
• Equipment import logistics: Japanese firms frequently import specialised construction and engineering equipment. Temporary import under customs bond and subsequent re-export requires meticulous documentation. Delays in re-export can trigger duty liability
• Transfer pricing scrutiny: Cost allocations between the Japanese head office and the Indian PO — including management fees, technical assistance, equipment usage charges, and overhead allocations — face close scrutiny from Indian tax authorities. Japanese companies should maintain detailed contemporaneous transfer pricing documentation aligned with both Indian and OECD standards
• Language barriers in regulatory filings: All Indian regulatory filings must be in English. Japanese companies need reliable bilingual staff or professional advisors who can bridge the Japanese corporate reporting style with Indian regulatory requirements

Frequently Asked Questions

Are JICA-funded projects automatically eligible for the general permission route?

Yes. Projects funded by a bilateral or multilateral international financing agency — including JICA — automatically qualify for the RBI's general permission route. The Japanese company can register the Project Office through the AD bank without prior RBI approval, significantly accelerating the setup timeline.

Can a Japanese Project Office execute multiple contracts?

No. Each Project Office is established for a single specific project. Additional contracts require separate Project Office registrations with independent UINs, bank accounts, and books of accounts. For companies managing multiple Indian projects, a Branch Office provides greater operational flexibility.

How are Project Office profits taxed in India?

Project profits are taxed at the 35% foreign company rate, plus 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, preventing double taxation.

What happens when the project is completed?

The Japanese company must wind up the Project Office by: (a) obtaining an auditor's certificate on winding-up proceeds, (b) settling all Indian tax liabilities, (c) submitting all pending AACs, (d) obtaining NOCs from the Income Tax Department, (e) remitting proceeds to Japan through the AD bank, and (f) filing for deregistration with the ROC. The process takes 4–8 months.

Can the Project Office import equipment from Japan?

Yes. Specialised equipment can be imported under a temporary customs bond (for re-export after project completion) or on a permanent basis with full customs duty. Japanese firms should plan customs documentation early and coordinate re-export timelines with project completion schedules.

Is there a minimum net worth requirement for Japanese parent companies?

Under the general permission route, there is no minimum net worth requirement for establishing a Project Office. The critical requirement is having a valid project contract that meets one of the general permission funding conditions. This contrasts with Liaison Offices (US $50,000 minimum) and Branch Offices (US $100,000 minimum).

Can Japanese subcontractors on JICA projects also set up Project Offices?

Yes, provided the subcontractor has a direct contractual relationship with the Indian entity or the main contractor, and the project meets the general permission conditions. Each subcontractor establishing a PO must independently register with the AD bank, ROC, and obtain PAN and TAN.