Global

Details

  • Service: Tax, Global Indirect Tax, Global Mobility Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 5/5/2014

India - PE status with seconded employees, of unused equipment 

May 5:  The KPMG member firm in India has prepared reports on the following developments (read the April and May 2014 reports by clicking on the hyperlinks provided below):
  • Seconded employees providing business support services constitute “service PE” in India - The Delhi High Court held that the secondment of employees by foreign group companies to an Indian company gives rise to a “service permanent establishment (PE)” in India. Furthermore, the services provided by these seconded employees were “technical or consultancy” in nature, and they also “made available” their know-how to the taxpayer for future consumption—and thus, were to be treated as “fees for technical / included services” under the income tax treaties between India and the UK and India and Canada.

    The case is: Centrica India Offshore Pvt. Ltd. Read a May 2014 report [PDF 338 KB]


  • VAT clarifications concerning Andhra Pradesh state reorganization - With regard to the imminent bifurcation of the current State of Andhra Pradesh into two states (Telangana and Seemandhra) effective 2 June 2014, a list of “frequently asked questions” (FAQ) with regard to the value added tax (VAT) changes emanating due to the upcoming bifurcation has been released by the tax authorities.

    Read a May 2014 report [PDF 273 KB]


  • Rig’s unused period due to repairs and maintenance not considered for PE in India - The Uttarakhand High Court held that for purpose of determining the existence of a permanent establishment (PE) under the India-United States income tax treaty, the period during which a rig was unused (on account of maintenance and repairs) is to be excluded from the threshold period of 120 days in any 12-month period for determining the existence of a PE. Accordingly, the High Court held that the period during which a rig in India is merely “ready for use” but not actually used, is not considered to determine the existence of a PE.

    The case is: R & B Falcon Offshore Ltd. Read a May 2014 report [PDF 303 KB]


  • Payment by animation film production company to foreign sub-contractor for creating “production material” not fees for technical services - The Hyderabad Bench of the Income-tax Appellate Tribunal held that payments made by an Indian animation film production company to a foreign sub-contractor for creating “production material” were not in the nature of fees for technical services and, accordingly, were not subject to withholding of tax in India. Also, the taxpayer's business with its overseas clients constituted business conducted by a resident outside India and was not taxable in India.

    The case is: DQ Entertainment (International) P. Ltd. Read a May 2014 report [PDF 332 KB]


  • Taxation of offshore, onshore supply and services under the composite contract - The Delhi High Court held that the consortium between the taxpayer and a foreign corporation did not form an association of persons; that the contract between them was divisible; that an offshore supply was not taxable in India because the property was transferred outside India and the contract did not provide a business connection in India; and that under the India-Germany income tax treaty if the taxpayer had a PE in India at the time when offshore services were being rendered and were attributable to the PE, the payment would be considered as business profits and taxed accordingly.

    The case is: Linde AG, Linde Engineering Division and Anr. Read an April 2014 report [PDF 443 KB]


  • Amortization of infrastructure construction projects (e.g., roads and highways) - Under Build-Operate-Transfer (BOT) projects, a developer of roads or highways (that is allowed to collect tolls from the users of such facilities) may amortize the cost of construction of such developments and claim such as an allowable business expenditure.

    Read an April 2014 report [PDF 382 KB]



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