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India: Permanent establishment thresholds, profit attribution rules

India: Permanent establishment thresholds

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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  • Measuring employee time for service permanent establishment (PE) threshold: The Mumbai Bench of the Income-tax Appellate Tribunal held that in determining the 90-day period for ascertaining whether there is a PE of a non-resident under the India-UK income tax treaty, an employee’s “leave period” is excluded, and the stay of employees in India on a particular day must be measured cumulatively and not independently (that is, multiple counting is to be avoided). The case is Linklaters. Read an April 2019 report [PDF 808 KB]

  • Proposed changes, profit attribution rules for PE in India: The Central Board of Direct Taxes (CBDT)—recognising issues relating to the attribution of profits to a PE as well as the need to bring greater clarity and predictability to the PE regime—formed a committee to examine the existing rules for the attribution of profit to PEs. The committee in April 2019 issued a report for public consultation, and the report includes recommendations for changes to the existing tax rules (Rule 10 of the Income-tax Rules, 1962).  Read an April 2019 report [PDF 826 KB]

  • Supreme Court on higher pension benefit under Employees’ Pension Scheme, 1995: The Supreme Court of India denied the government’s petition challenging a decision of the Kerala High Court that basically rejected rules that concerned the wage ceiling and pension contribution rules. Read an April 2019 report [PDF 864 KB]

  • No withholding on salary paid by Indian entity to employee seconded overseas: The Bombay High Court held that no tax is to be withheld (deducted) under section 195 of the Income-tax Act, 1961 on the amount of salary paid by an Indian entity to an overseas “deputed” (seconded) employee even if a foreign entity exercised supervision and control over the seconded employee. The case is: Supriya Suhas Joshi. Read an April 2019 report [PDF 746 KB] 

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