Audit of Liaison Office

Category: TAXATION
Date: Feb. 4, 2020

                                                                                  Audit of Liaison Office

What is Liaison office

Liaison Office is like a representative office of a company incorporated outside India. Establishment of Liaison Office in India require RBI approvals. Foreign company cannot route the application for establishment of Liaison office to RBI directly. It has to be routed through AD category- I Bank operating in India. Permission to open such office is granted initially for a period of 3 years and can be extended later by AD category bank

As the name suggests, Liaison office is permitted to do only liaisoning activities i.e. act as a communication channel between Head office and Indian entities

Permissible activities

A Liaison Office can undertake the following activities in India:

  1. Representing in India the parent company / group companies.
  2. Promoting export / import from / to India.
  3. Promoting technical/financial collaborations between parent/group companies and companies in India.
  4. Acting as a communication channel between the parent company and Indian companies

Revenue and Expenses

Revenue- Since Liaison office is not permitted to do any business activities, therefore it can earn any revenue or income.

Expenses- Liaison office can incur expenses pertaining to permissible activities by way of inward remittance from Head office

Compliances

  • Form 49C- Annual Statement under section 285 of the Income tax Act 1961

Details relating to compliance office activities needs to be furnished to Income tax department by way of annual statement within 60 days of the end of relevant Financial year. Form 49C needs to be digitally signed by Chartered Accountant or an Authorised signatory of Liaison Office. The same has to be filed online by login to income tax department website

  • Audited Financial Statements

The accounts of Liaison office are required to be audited by a Chartered Accountant in practice. Income and expenditure account. Balance sheet and Profit and loss account needs to be certified along with notes to account. The auditor shall furnish an audit report along with certified documents to Liaison Office representative in India

 

  • Annual activity Certificate (AAC)

AAC for the relevant financial year needs to be certified by auditor of Liaison Office. The format is as suggested by RBI

  • Submission of Documents

Liaison Office needs to furnish copy of audited financial statements along with Annual activity certificate certified by a Chartered Accountant in practice to AD category Bank and Principal CCIT (International Taxation) within 6 months from the end of relevant Financial year

One interesting point to note here is that time limit given for submission of AAC is 6 months from the end of previous year but time limit for 49C is 60 days from the end of previous year. Details of submission of AAC needs to be furnished in 49 C .Therefore audit and AAC should be completed within 60 days so as to furnish the details in form 49C. So six months’ time limit for AAC seems irrelevant in this context

 

 

 

 

 

 

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