India: Economic co-operation and trade agreement with Australia, tax implications for Indian companies

Australia agreed to stop the taxation of offshore income of Indian companies providing technical services to Australian clients.

Tax implications for Indian companies

India and Australia signed on 2 April 2022 an economic co-operation and trade agreement in which Australia has agreed to amend its domestic law to stop the taxation of offshore income of Indian companies providing technical services to Australian clients.

Background

Indian information technology service companies have received unfavorable decisions from litigation in Australia regarding the taxation of services provided to Australian clients by their employees based in India. The Indian companies argued that such services were not taxable in Australia as such services were not sourced in Australia and were not royalties under Australia’s domestic tax law, but the Australian courts held otherwise.

Australia’s agreement to amend its domestic law to stop the taxation of such services income will provide prospective relief from royalty withholding tax for Indian companies providing such services to Australian clients.

Read an April 2022 report [PDF 560 KB] prepared by the KPMG member firm in India

 

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor 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 on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.