Set Up a Project Office in India from Sweden

How to Register a Project Office in India from Sweden

A Project Office (PO) is a temporary establishment that allows a Swedish company to execute a specific project contract awarded by an Indian entity. Unlike a Liaison Office, a Project Office can undertake commercial activities — but only those directly related to the contracted project. Unlike a Branch Office or Private Limited Company, the Project Office ceases to exist once the project is completed.

Sweden and India share a strong commercial relationship, with bilateral trade reaching nearly USD 7 billion in 2024. Over 280 Swedish companies operate in India, with particular strength in infrastructure, clean energy, industrial automation, and IT — sectors where project-based engagements are common. Swedish engineering firms such as Skanska, NCC, and Sandvik, as well as technology companies, frequently use Project Offices to execute specific Indian contracts without establishing a permanent subsidiary.

A Project Office can be established under the RBI's General Permission route (no prior RBI approval needed) if certain conditions are met, or through a Specific Approval route for restricted cases. The setup is faster than other entity types because the General Permission route does not require the RBI to review and approve the application before establishment.

FDI Route and Regulatory Requirements

A Project Office in India operates under a unique regulatory framework — the RBI has granted a standing General Permission for eligible foreign companies, making it the fastest office establishment route for project-based work.

General Permission Route (No Prior RBI Approval)

A Swedish company that has been awarded a contract by an Indian entity can establish a Project Office in India without prior RBI approval, provided at least one of the following conditions is met:

• The project is funded directly by inward remittance from abroad (from the Swedish parent or its bankers)
• The project is funded by a bilateral or multilateral international financing agency
• The project has been cleared by an appropriate authority in India
• The Indian entity awarding the contract has obtained a term loan from a Public Financial Institution or bank in India for the project

Under this route, the Swedish company simply reports the establishment to the concerned regional office of the RBI through its AD Category-I bank.

Specific Approval Route

Under the RBI's 2025 draft regulations, the Specific Approval Route applies when:

• The foreign entity is from a country subject to Press Note 3 restrictions (not applicable to Sweden)
• The entity operates in sensitive sectors such as defence, telecom, private security, or information broadcasting
• The entity has foreign government ownership
• The project is in a restricted geographic area (Jammu & Kashmir, Ladakh, Northeast India, or Andaman & Nicobar Islands)

Swedish companies in standard commercial sectors qualify for the General Permission route.

Press Note 3 — Not Applicable to Sweden

Press Note 3 (2020) restrictions, which impose additional security screening on entities from countries sharing a land border with India, do not apply to Sweden. Swedish companies can proceed through the General Permission or standard Specific Approval route without additional government clearance.

Key 2025 Regulatory Changes

The RBI's 2025 draft regulations introduce several improvements for Project Offices:

• A single Project Office may now undertake multiple projects (previously, each project required a separate PO)
• Separate books of accounts must be maintained for each project
• Additional places of business can be opened under mere intimation to the designated bank (no fresh approval needed)
• The UIN allotment process has been streamlined — AD banks report establishment details post-approval, and RBI allots the UIN based on submitted data

DTAA Benefits for Swedish Investors

The India-Sweden Double Taxation Avoidance Agreement, effective since January 1, 1998, and amended by a 2013 Protocol, has direct implications for Project Office taxation because a Project Office may constitute a Permanent Establishment (PE) depending on the project duration.

Project Office and Permanent Establishment

Under the India-Sweden DTAA, a building site or construction or installation project constitutes a PE only if it lasts more than 6 months. For Swedish companies executing short-term projects (under 6 months), the Project Office may not trigger PE status, meaning India may not have the right to tax the Swedish company's business profits from that project. For projects exceeding 6 months, the Project Office will likely constitute a PE, and business profits attributable to the Indian project will be taxable in India.

Tax Rates for Project Office

• Corporate Tax (if PE exists): 35% plus applicable surcharge and cess, as a foreign company
• Interest: Withholding capped at 10% under the DTAA
• Royalties: Capped at 10% under the DTAA
• Fees for Technical Services: Capped at 10% under the DTAA

Double Tax Relief

Sweden follows the credit method for eliminating double taxation under Article 24 of the India-Sweden DTAA. The Swedish parent company includes the Project Office's income in its global income and receives a credit for Indian taxes paid. This prevents the same income from being taxed in both countries.

Transfer Pricing

Transactions between the Swedish head office and the Indian Project Office must comply with India's transfer pricing regulations. The attribution of profits to the Project Office, any charges for head office services, equipment usage, and intellectual property must be documented at arm's length prices.

Document Requirements and Authentication

Both Sweden and India are members of the Hague Apostille Convention. Swedish documents require apostille certification for use in India — a simpler process than embassy attestation.

Documents from the Swedish Parent Company

• Certificate of Registration (Registreringsbevis) from Bolagsverket — apostilled
• Board resolution authorising the establishment of a Project Office in India — apostilled
• Memorandum and Articles of Association (Bolagsordning) — apostilled
• Project contract or agreement awarded by the Indian entity — apostilled
• Latest audited financial statements of the Swedish parent — apostilled
• Power of Attorney in favour of the authorised representative — apostilled
• Details of project funding arrangement (inward remittance, international financing, or Indian term loan)

Documents for AD Bank Reporting

• Letter to the AD Category-I bank reporting the establishment of the Project Office
• Copy of the project contract with the Indian entity
• Evidence of funding source (remittance confirmation, financing agreement, or term loan sanction letter)
• Proposed organisational structure of the Project Office
• Estimated project timeline and budget

Apostille Process in Sweden

Apostilles are issued by authorised Notaries Public under the County Administrative Board (Länsstyrelsen). Documents must first be notarised by a Swedish Notary Public, then presented for apostille certification. Processing typically takes 3-5 business days.

Step-by-Step Registration Process

The Project Office setup is faster than a Branch or Liaison Office when the General Permission route applies, as no prior RBI approval is needed.

Step 1: Secure the Project Contract

The Swedish company must first be awarded a specific project contract by an Indian entity. The contract should clearly define the scope of work, timeline, deliverables, and payment terms. This contract is the foundation for the Project Office — without it, no establishment is possible.

Step 2: Swedish Parent Board Resolution

The board of directors of the Swedish parent company passes a resolution authorising the establishment of a Project Office in India for the specific project. The resolution must reference the project contract and specify the authorised representative. Apostille the resolution.

Step 3: Verify Funding Eligibility

Confirm that the project meets at least one of the General Permission conditions — direct funding by inward remittance, international financing, appropriate authority clearance, or Indian term loan funding. If none apply, the Specific Approval route through RBI is required.

Step 4: Report to AD Bank and RBI

Under the General Permission route, the Swedish company reports the establishment of the Project Office to the concerned regional office of the RBI through its AD Category-I bank. The AD bank reviews the documents and assigns a Unique Identification Number (UIN). No waiting period for RBI approval is required.

Step 5: Register with Registrar of Companies

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. Include the project contract, charter documents, and address proof of the Indian office.

Step 6: Obtain PAN, TAN, and GST Registration

Apply for a PAN in the name of the Swedish parent company (Indian Project Office). Obtain TAN for tax deduction at source and GST registration if the project activities attract GST.

Step 7: Open Bank Accounts

Open project-specific bank accounts with the AD Category-I bank. The 2025 draft regulations require separate accounts for each project if the PO undertakes multiple projects. Inward remittances from Sweden and project payments from the Indian entity will flow through these accounts.

Step 8: Commence Project Work

Once registrations and bank accounts are in place, the Project Office can begin executing the contracted project. Activities must be strictly limited to those related to the specific project.

Timeline and Costs

The Project Office setup is typically faster than a Branch or Liaison Office because the General Permission route eliminates the RBI approval waiting period.

Total estimated timeline: 4-8 weeks from document preparation to operational Project Office (General Permission route). Add 4-8 weeks if the Specific Approval route is required.

Total estimated cost: INR 1,00,000-2,50,000 (approximately SEK 11,000-27,500) including government fees, professional fees, and legal costs. Project-related operational costs (staffing, equipment, materials) are separate.

Post-Registration Compliance

A Project Office has specific compliance obligations tied to the project lifecycle.

Annual RBI Compliance

• Annual Activity Certificate (AAC): A Chartered Accountant must certify that the Project Office undertook only activities related to the approved project. The AAC and audited financial statements must be submitted to the AD bank within 6 months of the financial year end.
• FLA Return: Annual Return on Foreign Liabilities and Assets, due by July 15
• Project-wise accounts: Under the 2025 draft regulations, separate books of account must be maintained for each project

ROC Filings

• Annual return of foreign company filed with the ROC
• Financial statements of the Project Office and copies of the Swedish parent's global financial statements
• Intimation of changes in the Swedish parent's charter, directors, or registered office within 30 days

Tax Compliance

• Corporate Tax Return: If the Project Office constitutes a PE (project exceeding 6 months), file a tax return as a foreign company at 35% plus surcharge and cess
• GST Returns: Monthly or quarterly depending on turnover
• TDS Returns: Quarterly filing for all tax deducted at source
• Transfer Pricing Documentation: Required for transactions between the Project Office and the Swedish head office
• Advance Tax: Quarterly instalments if the tax liability exceeds INR 10,000

Project Completion and Closure

Upon project completion, the Project Office must:

• File a final AAC covering the project closure period
• Settle all tax liabilities and obtain tax clearance certificates
• Remit remaining balances to the Swedish parent through the AD bank
• File closure documents with the ROC
• Surrender the PAN, TAN, and GST registrations

Common Challenges for Swedish Companies

Swedish companies operating Project Offices in India encounter several practical challenges.

Scope Limitation

A Project Office is tied to a specific project contract. It cannot undertake any commercial activity outside the scope of that project. If a Swedish company wins additional contracts in India, it must either establish a new Project Office for each contract (under the old rules) or register the new project under the same PO with separate accounts (under the 2025 draft regulations). For Swedish companies seeking a broader, long-term presence, a Branch Office or Private Limited Company is more appropriate.

PE Threshold and Tax Exposure

The 6-month PE threshold under the India-Sweden DTAA means that most infrastructure and construction projects will trigger PE status and the 35% foreign company tax rate. Swedish companies must factor this tax cost into project pricing from the outset. Careful project structuring — such as splitting work between onshore and offshore components — can help optimise the tax position, but must be substantiated with genuine business rationale.

Project Delays and Compliance

Indian infrastructure projects frequently experience delays. A Project Office that extends beyond its estimated timeline must continue complying with all annual filings, AACs, and tax returns. Failure to submit the AAC for three consecutive years can trigger account freezing and closure proceedings by the RBI — a serious risk for delayed projects where the Swedish parent may have reduced its attention to Indian compliance.

Closure Complexity

Closing a Project Office is not instant. It requires settlement of all liabilities, tax clearance from the Income Tax Department, a final AAC, and formal deregistration with the ROC. Disputes with the Indian contracting party, pending tax assessments, or unresolved GST credits can delay closure significantly. Swedish companies should build closure timelines and costs into their project plans.

Multiple Projects Under One PO

The 2025 draft regulations allow a single PO to undertake multiple projects — a welcome change. However, the requirement for separate books of account per project increases the accounting and audit burden. Swedish companies managing multiple concurrent projects must ensure their Indian accounting teams are equipped to maintain project-wise segregation.

Frequently Asked Questions

Does a Swedish company need RBI approval for a Project Office?

Not necessarily. Under the General Permission route, a Swedish company with a project funded by inward remittance, international financing, appropriate authority clearance, or Indian term loan can establish a Project Office without prior RBI approval — it only needs to report to the AD bank. The Specific Approval route applies to restricted sectors or sensitive geographies.

Can a Project Office undertake activities beyond the contracted project?

No. A Project Office is strictly limited to activities related to the specific project contract. Any commercial activity outside the project scope can attract regulatory penalties, including revocation of the RBI approval and FEMA violations.

How is a Project Office taxed in India?

If the project lasts more than 6 months (the PE threshold under the India-Sweden DTAA), the Project Office is treated as a PE and business profits are taxed at 35% plus surcharge and cess. Projects under 6 months may not trigger PE status, potentially avoiding Indian tax on business profits.

What happens when the project is completed?

Upon project completion, the Project Office must file a final AAC, settle all tax liabilities, obtain clearance certificates, remit remaining balances to Sweden through the AD bank, and deregister with the ROC. The closure process typically takes 3-6 months.

Can one Project Office handle multiple projects?

Under the 2025 draft regulations, yes. A single Project Office can undertake multiple projects, provided separate books of account are maintained for each project. Previously, each project required a separate PO with separate bank accounts.

How does the General Permission route differ from the Specific Approval route?

The General Permission route allows establishment without prior RBI approval — the Swedish company simply reports to the AD bank. The Specific Approval route requires formal RBI review and is mandatory for entities in restricted sectors, from countries subject to Press Note 3, or operating in sensitive geographies. Swedish companies in standard sectors use the General Permission route.