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.
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
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