How to Set Up a Project Office in India from South Korea
A Project Office (PO) allows a South Korean company to establish a temporary presence in India to execute a specific project. Unlike a Private Limited Company or WOS, a project office is tied to a specific project contract and exists only for the duration of that project.
This structure is widely used by Korean companies in construction, infrastructure, engineering, electronics manufacturing setup, automotive plant installation, and power projects. Major Korean conglomerates like Samsung Engineering, Hyundai Engineering & Construction, POSCO, and Doosan have used project offices to execute large-scale projects across India.
South Korea enjoys a significant regulatory advantage: Korean companies can establish project offices under the RBI's general permission route, avoiding the lengthy specific permission process required for companies from China or Pakistan. Combined with the apostille process for document authentication and the benefits of the India-South Korea CEPA, this makes the setup process fast and efficient.
Project Office vs. Other Entity Types
A project office differs from a liaison office (which cannot conduct commercial activities) and a branch office (which can perform ongoing, broader activities). A project office is focused on executing a single specific project, can earn income from that project, and must be closed upon project completion. For a detailed comparison, see Liaison Office vs. Project Office vs. Branch Office.
FDI Route & Regulatory Requirements
South Korea is on the automatic route for FDI in India. Korean companies do not require government approval or Press Note 3 clearance — they can establish project offices under the RBI's general permission framework.
General Permission Route (Available for South Korea)
The RBI grants general permission to foreign companies from non-restricted countries to establish project offices in India, provided the following conditions are met:
- The Korean company has secured a contract from an Indian company to execute a project in India
- The project is funded through one of these approved mechanisms:
- Inward remittance from the Korean parent company
- A bilateral or multilateral international financing agency
- Cleared by an appropriate Indian authority
- An Indian company awarding the contract has been granted a term loan by a public financial institution or bank
Under general permission, the Korean company does not need to file Form FNC for individual RBI approval. It can directly approach the AD bank, which processes the application without forwarding it to the RBI. This is a major advantage over companies from Press Note 3 countries.
When Specific Permission is Required
Even for Korean companies, specific RBI permission is required if:
- The project office will be located in the North Eastern Region, Jammu & Kashmir, or Andaman & Nicobar Islands
- The Korean company is engaged in defence, private security, telecom, or information and broadcasting sectors
In these cases, the Korean company must file Form FNC through the AD bank for specific RBI approval, though without the Press Note 3 security clearance required for Chinese companies.
DTAA Benefits for South Korean Companies
The India-South Korea DTAA, revised in 2015 and effective from April 2017, has important implications for project offices.
Permanent Establishment Considerations
A project office in India typically constitutes a Permanent Establishment (PE) of the Korean parent company under the DTAA, particularly if the project duration exceeds 183 days. This means the project office's income is taxable in India, but the Korean parent can claim a foreign tax credit in South Korea for taxes paid in India, eliminating double taxation.
Revised DTAA Withholding Tax Rates
| Income Type | Domestic Rate | Revised DTAA Rate | Savings |
|---|---|---|---|
| Interest | 20% | 10% | 10% |
| Royalties | 20% | 10% | 10% |
| Fees for Technical Services | 20% | 10% | 10% |
| Dividends | 20% | 15% | 5% |
The revised DTAA reduced withholding rates on interest and royalties/FTS from 15% to 10%. It also introduced a Limitation of Benefits clause to prevent treaty abuse and broadened dependent agent PE provisions.
Tax Rate for Project Office Profits
Project office profits are taxed at the foreign company rate — 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 Korean parent can claim credit for these taxes in South Korea.
CEPA Integration
The India-South Korea CEPA complements the DTAA by providing reduced customs duties on equipment and materials imported for project execution. Korean companies can import project equipment at preferential tariff rates under CEPA, reducing overall project costs. This is particularly beneficial for infrastructure and manufacturing setup projects.
Document Requirements & Authentication
Document authentication between India and South Korea follows the apostille route. Both countries are members of the Hague Apostille Convention — India since 2005 and South Korea since 2007 — making the authentication process significantly simpler than for countries like China.
Documents Required
- Project contract with the Indian party — the foundational document, detailing scope, timeline, value, payment terms, and completion criteria
- Board resolution (이사회 결의서) of the Korean parent company authorizing establishment of a project office for the specific project
- Business registration certificate (사업자등록증) — apostilled
- Certificate of incorporation (법인 등기부등본) — apostilled
- Audited financial statements of the Korean parent company (last 2-3 years)
- Banker's certificate from the Korean bank confirming good standing
- Power of Attorney in favour of the Indian representative — apostilled
- Details of project funding arrangement
- Passport copies of authorized personnel
Apostille Process for Korean Documents
Korean documents can be apostilled through the Ministry of Justice (법무부) or the Ministry of Foreign Affairs (외교부). South Korea's e-Apostille service enables electronic processing, reducing turnaround to as little as 1-2 business days. Korean-language documents require certified English translation. The total apostille process typically takes 3-7 business days — a fraction of the 3-5 weeks required for embassy attestation from China.
Step-by-Step Registration Process
Step 1: Secure the Project Contract
The Korean company must first sign a project contract with an Indian party. The contract must clearly define the project scope, timeline, deliverables, payment terms, and funding arrangement. Without a valid project contract, no project office application can proceed.
Step 2: Prepare and Apostille Documents (3-7 Days)
Gather required documents from the Korean parent company, have them notarized and apostilled through the Korean Ministry of Justice or Foreign Affairs. Use the e-Apostille service for fastest processing. Arrange certified English translations.
Step 3: Register with AD Bank Under General Permission (1-2 Weeks)
Approach an Authorized Dealer bank in India with the project contract and apostilled documents. Under the general permission route, the AD bank processes the application without forwarding to RBI. The bank verifies documents through SWIFT-based verification with the Korean banker.
Step 4: 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). Obtain PAN and TAN for tax purposes.
Step 5: Open Bank Account & Receive Project Funds
Open a bank account with the designated AD bank. The Korean parent company remits project funds, or the Indian contracting party makes payments per the contract. FDI reporting must be filed within 30 days of receiving funds.
Step 6: Commence Project Execution
Begin project activities as specified in the contract. The project office's operations are limited to the scope of the approved project.
Timeline & Costs
Realistic Timeline from South Korea
| Stage | Duration | Notes |
|---|---|---|
| Secure project contract | Variable | Must be in place before applying |
| Document apostille in Korea | 3-7 days | e-Apostille available for faster processing |
| AD bank registration (general permission) | 1-2 weeks | No RBI-specific approval needed |
| ROC registration (Form FC-1) | 1 week | Within 30 days of establishment |
| PAN/TAN & bank account opening | 1-2 weeks | Standard due diligence |
| Total estimated timeline | 3-6 weeks | Much faster than PN3 countries |
Cost Breakdown
| Expense | Approximate Cost |
|---|---|
| ROC filing fees (Form FC-1) | ₹6,000-₹10,000 |
| Apostille & notarization in Korea | ₹5,000-₹15,000 |
| Professional fees (CA/CS/legal) | ₹50,000-₹1,50,000 |
| Project office space & setup | Varies by city and project location |
| Annual compliance costs | ₹30,000-₹75,000 |
There is no minimum capital requirement for a project office. The project must be funded through an approved mechanism. Under CEPA, certain project equipment imports may qualify for reduced customs duties.
Post-Registration Compliance
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. Must confirm the project office engaged only in activities related to the approved project
- 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 within 60 days of the financial year close
- Form FC-3: Annual accounts within 6 months of the parent company's financial year close
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 exceed the threshold under Section 44AB
- GST returns: Monthly/quarterly as applicable
- TDS returns: Quarterly
- Transfer pricing: Documentation required for transactions between project office and Korean parent
Project Completion and Closure
- Upon project completion, file closure application with the AD bank
- Obtain tax clearance certificate from the Income Tax Department
- File final returns and settle all liabilities
- Remit winding-up proceeds to the Korean parent through the AD bank
- AD bank reports closure to the RBI regional office
Common Challenges for South Korean Companies
1. Project Scope Limitations
A project office can only undertake activities specified in the project contract. Korean companies executing multiple unrelated projects in India must establish separate project offices for each — or consider a Branch Office or WOS for broader operational flexibility. This is particularly relevant for Korean EPC firms with multiple concurrent Indian projects.
2. Higher Tax Rate for Foreign Companies
Project offices are taxed at 35% (effective approximately 38.22% with surcharge and cess), compared to the 22-25% rate for Indian-incorporated companies. For Korean companies with large or recurring projects, establishing a Private Limited Company or WOS may be more tax-efficient in the long run.
3. Transfer Pricing Complexity
Transactions between the Korean parent and the Indian project office — including management fees, equipment transfers, and personnel costs — require proper transfer pricing documentation. Korean companies must ensure all inter-company transactions are at arm's length to avoid transfer pricing adjustments and penalties.
4. CEPA Utilization Challenges
While CEPA offers preferential tariff rates on imported equipment, Korean companies often underutilize these benefits due to complex rules of origin documentation, unfamiliarity with CEPA procedures, and the administrative burden of obtaining certificates of origin. Working with a customs specialist can help maximize CEPA savings.
5. Closure Timeline
Closing a project office after project completion requires tax clearance, final filing of returns, and RBI approval. If there are pending tax assessments or disputes, the closure can be delayed significantly. Korean companies should begin the closure process well before the planned end of the project to avoid carrying compliance costs after project completion.
6. Geographic and Sector Restrictions
While most Korean project offices benefit from the general permission route, projects in North Eastern states, J&K, or Andaman & Nicobar Islands, or projects in defence, private security, telecom, or information broadcasting sectors, require specific RBI permission even for Korean companies. This adds 2-4 weeks to the setup process for these specific cases.
Frequently Asked Questions
Can a South Korean company use the general permission route for a project office?
Yes. South Korea is not a Press Note 3 country, so Korean companies can establish project offices under RBI's general permission route. The only requirements are a valid project contract with an Indian party and an approved funding mechanism. No specific RBI approval is needed for most projects.
What type of contract is required?
A valid project contract with an Indian company that clearly defines the project scope, timeline, deliverables, payment terms, and funding arrangement. The project must be funded by inward remittance from Korea, a bilateral financing agency, or an Indian company's term loan from a public financial institution.
Can Korean documents be apostilled for use in India?
Yes. Both India and South Korea are Hague Apostille Convention members. Korean documents can be apostilled through the Ministry of Justice or Ministry of Foreign Affairs, including via the e-Apostille service. The process takes 3-7 business days — much faster than embassy attestation.
How long does a project office setup take from South Korea?
Approximately 3-6 weeks under the general permission route. Document apostille takes 3-7 days, AD bank registration takes 1-2 weeks, and ROC registration plus bank account opening takes another 1-2 weeks. This is dramatically faster than the 12-22 weeks for Chinese companies.
What is the tax rate for a Korean project office in India?
35% corporate tax (reduced from 40% effective AY 2025-26) plus surcharge and cess, resulting in an effective rate of approximately 38.22%. The India-South Korea DTAA allows the Korean parent to claim foreign tax credit for taxes paid in India.
Does CEPA reduce costs for Korean project offices?
Yes. The India-South Korea CEPA provides preferential tariff rates on equipment and materials imported for project execution. Korean companies can import project equipment at reduced customs duties, lowering overall project costs. Proper rules of origin documentation is required.
What happens when the project is completed?
The project office must be formally closed. This involves filing a closure application with the AD bank, obtaining tax clearance, filing final returns, settling all liabilities, and remitting winding-up proceeds to the Korean parent. Begin the process 2-3 months before planned project completion.