Is Your Overseas Parent / Group Company Tax Compliant in India?
Wednesday Sep 14, 2016

Under the existing provisions of the Indian Income-tax Act (IT Act), every foreign company is required to submit an annual corporate tax return in respect of incomes earned in India. These incomes are generally in the nature of royalties, technical / supervision / installation fee, management fee, interest, cost contribution arrangements, sale of goods etc. received by such foreign company from related & unrelated entities in India and are subject to withholding tax (WHT) at source.

In most of these cases, the annual corporate tax filing is a mere declaration of business transacted in India i.e. typically in cases where income accrues from royalties, technical fee, management fee, interest etc., income is reported, credit of WHT is claimed against the final tax liability and balance tax is paid or a refund claim is lodged. However, those involving an element of continuity / permanency in operations eg. long term (generally > 6months) supervisory, engineering, installation contracts, sales team visiting for longer durations etc., the aspect of Permanent Establishment (PE) may become relevant and thus a deeper analysis of IT Act as well as the bilateral tax convention (DTAA) is necessary to draw a final tax computation.

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