A Liaison Office (LO) can undertake only liaison activities, i.e., it can act as a channel of communication between the Head Office abroad and parties in India. It is not allowed to undertake any business activity in India and cannot earn any income in India. Expenses of such offices are to be met entirely through inward remittances of foreign exchange from the Head Office outside India. The role of such offices is, therefore, limited to collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers.
The RBI allows LOs to undertake the following activities in India:
Permission to set up LOs are initially granted for a period of three years, and this may be extended from time to time by the Authorized Dealer in whose jurisdiction the LO is set up. No extension would be considered for LOs of entities that are Non-Banking Financial Companies (NBFCs) and those engaged in construction and development (excluding infrastructure development companies). Upon expiry of the validity period, these entities must either close or be converted into a company, in conformity with the current FDI policy.