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India: Payment of guarantee fees not taxable under tax treaty with Netherlands

India: Payment of guarantee fees not taxable

The KPMG member firm in India has prepared reports about the following tax developments (read more at the hyperlinks provided below).

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  • Authority for tribunal to refer matters to larger bench: The Division Bench of the Mumbai Income-tax Appellate Tribunal has referred to a larger bench a case concerning issues from a 2020 budget law amendment providing that a tribunal may grant a stay subject to a condition that the taxpayer deposits not less than 20% of the amount of tax, interest, and fees or furnishes security of an equal amount. The case is: Tata Education and Development Trust. Read a June 2020 report [PDF 200 KB]

  • Payment of guarantee fees to group entity not taxable under India-Netherlands income tax treaty: The Delhi Bench of the Income-tax Appellate Tribunal—in a case concerning the tax treatment under the income tax treaty between India and the Netherlands of a payment of guarantee fees made to a Netherlands-based holding company—held that in general the guarantee fees paid by the taxpayer to the holding company were not payments of interest under the tax treaty and that: (1) the payment was not fees for technical services; (2) the guarantee fees were not subject to tax as business income, absent a permanent establishment of the Netherlands-based holding company in India; and (3) the tax treaty did not include an “other income” article. Read a June 2020 report [PDF 343 KB]

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