Foreign firms get nod to set up SEZ branches

The Reserve Bank of India has granted general permission to foreign companies to establish branch offices/ units in special economic zones to undertake manufacturing and service activities.

Foreign companies can establish branch offices/ units in SEZs provided 100 per cent foreign direct investment is permitted in the relevant sectors.

The said branch offices/ units should function on a stand-alone basis. Stand alone basis means that such branch offices would be isolated and restricted to the SEZ alone and no business activity/ transaction will be allowed outside the SEZs in India, which includes branches/ subsidiaries of its parent office in India.

In the event of winding-up of business and for remittance of winding-up proceeds the branch offices/ units have to approach an authorised dealer with relevant documents.

The documents include an auditor's certificate, which will indicate the manner in which the remittable amount has been arrived, and supported by a statement of assets and liabilities of the applicant, and indicating the manner of disposal of assets.

Further the branch offices/ units will have to produce proof confirming that all liabilities in India including arrears of gratuity and other benefits to employees etc., of the branch/office have been either fully met or adequately provided for. They have to confirm that no income accruing from sources outside India (including proceeds of exports) has remained unrepatriated to India.

The branch offices/ units have to obtain no-objection or tax clearance certificate from Income- Tax authority for the remittance. Confirmation from the applicant that no legal proceedings in any court in India are pending and there is no legal impediment to the remittance.