§ 1
Payroll that supports the liaison office's status
The payroll itself follows the normal Indian rules. What is specific to a liaison office is the funding cycle, since remittances must arrive in time for salary and statutory payments, and the documentation of roles. Incentive schemes tied to sales targets, in particular, are a common source of permanent establishment questions.
§ 2
The law that applies
| Income-tax Act, 2025 | TDS on salaries. |
|---|---|
| Labour codes and state laws | PF, ESI, gratuity and establishment registration. |
| FEMA Regulations, 2016 | Funding of liaison office expenses by inward remittance. |
§ 3
Issues and how we solve them
The problems that most often hold up or complicate this work, and how we deal with each.
Issue 1
Remittances arrive after salary day.
Our approach
We give the head office a monthly funding request with salary, statutory dues and expenses a week before they fall due.
Issue 2
Bonus plans are tied to Indian sales.
Our approach
We flag incentive structures that suggest selling activity and suggest alternatives consistent with liaison functions.
§ 4
Process and timeline
- 1
Monthly
MonthlyFunding request, payroll, TDS, PF, ESI and professional tax.
- 2
Annual
AnnuallyTax certificates and reconciliation with the annual statement of activities.
§ 5
Our scope of work
Included
- Employer registrations
- Monthly payroll and funding requests
- Statutory payments and returns
- Role and incentive review
§ 6
Questions
Can a liaison office pay sales commission to its staff?
Commission linked to Indian sales suggests the office is doing business in India, which it is not permitted to do. Such schemes should be reviewed before they are introduced.
Prepared by CA Utsav Dogra, Chartered Accountant, ICAI M. No. 542375, SU and Company · Last reviewed 4 November 2026. General information only, based on the law as it stood on that date; it is not advice for any particular case.