By TaxbyManish (November 2014).
·
There
cannot be any withholding tax on payment to foreign branch and also there
cannot be any transfer pricing study for international transactions with
branch.
·
In
the case of concluding contracts, there may be case of dependent agent.
·
A
subsidiary cannot be a PE for holding company and vice versa due to clause of
article 5(6) of DTAA. However, it may happen due to satisfaction of other
conditions in the DTAA.
·
For
preparatory & auxiliary services, PE cannot be created ( refer articles of
DTAA & Nike Inc case law).
·
PE
means unincorporated activity in other country jurisdiction. (means fiction)
·
Effects
of creation of PE.
Ø
Primary - taxation in other country.
Ø
Secondary
– (i) Taxation of employee (however not applicable to dependent agent as
fiction cannot have employee).
(ii) Interest & FTS covered
under different articles.
·
Important case law reference for PE.
(i)
Nike
Inc.
(ii)
Morgan
Stanley
(iii)
SAP
India
(iv)
Mondeal
·
The reimbursement of secondment employees
salary to other country is covered under section 9 (vii), explanation 2 where it mentioned
that including the provision of services of technical or other personnel and
hence payment accordingly covered under 195. Now assesse should refer the DTAA
with respective country and check in the FTS clause to claim any kind of
relief. Example, relief is available in the US, Singapore DTAA with India, but
not there in Japan India DTAA.
·
Also
refer the DTAA of country where foreign company is legally registered and not
the DTAA of country where branch is located. Ex. Payment made to Citibank
Singapore. Refer the DTAA of US and not Singapore.
·
Similarly
obtain PAN & TRC of head office country and not branch country.
·
While
referring any European country DTAA, also refer MFN clause and read the
explanations provided at the end.
·
In
case of secondment employee, PE can be triggered. However, as per OCED
guidelines, there cannot be any PE in case of economic employer relationship.
·
As
per CBDT clarification 2/2014 dated dated February 26, 2014, it has been
clarified that WHT is only on sum
chargeable to Income Tax. There cannot be any tax or interest or penalty on
amount which not subject to tax in India.
·
Protocol
of US India DTAA contains explanation of make available.
·
In
the decision of TaJ hotels it had been decided that reimbursement cannot be
considered as FTS.
·
For
definition of FTS, please refer section 2(d) of India contact act 1872.
·
For
application of section 195, there should be some income component.
·
In
case of E Commerce, there is CST for sale from one state to another otherwise
it is only VAT for sale in same state.
·
As
per WTO 1998 circular, there cannot be any custom duty on any downloading
electronic data.
·
Providing
online facility to seller is FTS.
·
The
location of server constitutes the PE.
·
Websites
from ISP does not creates PE.
·
Read
the following for e commerce understanding.
(i)
India
Contracts Act, 1872
(ii)
Sale
of good Act 1930
(iii)
Constitution
of India Article 286(1), 286(2), 366(29A) & Entry 54 List II.
(iv)
Copyright
Act 1962.
·
No
Tax on movement of goods from one warehouse to another.
·
Branded
software is good under sales tax, but for unbranded software no decision yet
and under service tax all software is service and under income tax all software
is royalty.
·
There
cannot be any SDT (specified domestic transfer) for allocation of expenses in
the different units of same company.
·
271AA
& 271G penalty both cannot apply together.
·
SDT
can disallow the expenses but cannot increase the income.
·
In
the decision of Vodafone & Shell India it had been decided that share issue
transaction at lower than market price cannot bring deemed share premium under
TP.
·
The major change in budget 2014 is in respect of SDT
with third party where third party may have direct/indirect relationship with
related company.
·
GAAR
cannot covert permissible arrangements into impermissible arrangements.
·
Deeming
section or anti avoidance sections cannot apply to other country.
No comments:
Post a Comment