Courts in India commented recently on the taxation of non-residents doing business in India. Previously, an Indian court that ruled that a foreign liaison office in India must pay tax on income-friendly activities.
In another previous ruling by the Indian high court, employees of a U.S. parent sent to India to provide stewardship services were not deemed to establish a PE even if the employees of the non-resident taxpayer were taken on deputation.
KPMG India notes that taxpayers generally take the position that the applicable Indian affiliate, and not the multinational, is the "economic employer" of the seconded employees. As such, these employees do not result in a PE in India. However, court decisions related to secondment arrangements have been inconsistent - some sided with the taxpayer, others with the Indian taxation authorities. Given the adverse decision of the high court, KPMG India advises clients with Indian secondment arrangements to evaluate alternative structuring options and other risk-mitigation measures. You should consider these issues, as well as, among other things, issues related to human resources, indirect tax, foreign exchange, transfer pricing, and social security.
For more information, contact your KPMG adviser.
Information is current to May 20, 2014. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500