We guide on selection of entity in India; whether to form a company or LLP or a liaison office etc. Benefits like having a lower tax rate in case of a company but a nil dividend distribution tax under an LLP, cash extraction options with tax implications are evaluated with the investor.
We advise on an international transaction
What are the types of Cross Border Taxation/Transactions?
There are two basic types of cross-border transactions. Outbound transactions involve Indian taxpayers doing business or investing in foreign countries and inbound transactions involve foreign taxpayers doing business or investing in India.
Our Inbound Services include
The profits of an enterprise of one country are taxable in the other country, only if the enterprise maintains a PE in the later country and only to the extent that profits are attributable to the PE. When entering into a cross border transaction, it is important to analyse the risk of PE in the other country to avoid any double taxation.
When profits pile up in an investment company, the foreign company looks for ways of repatriation. One of the most common ways of repatriation is dividend payment. Dividend payments attract a distribution tax which is a cost to the enterprise. The best strategy of repatriation for each enterprise will differ and depends on various factors. An Enterprise can combine two or more ways of repatriation and also have different repatriation strategy for each year.
Due to the complex tax system, companies seek assurance on tax implications on proposed transactions through advance rulings. Advance rulings obtained from revenue authorities may affect the decisions of foreign companies for investment in a particular country.
Every foreign company having taxable income in India has to file an income tax return. We prepare and file tax returns after scrutinising all the contracts/invoices with the Indian parties and maintain the records for any future scrutiny assessments. This helps in the assessments as the documentation is all ready.
Our Outbound Services include
While making payments to a non resident, it is necessary to evaluate whether withholding taxes are applicable. The tax rate depends on various documents like the no PE declaration, tax residency certificate and form 10F. If the tax is not withheld, the full expense is disallowed for tax purpose. A certificate from a Chartered Accountant is required by bank certifying the withholding tax rate. We assist in ascertaining the applicability of taxes and the execution of remittances.
We have an experience of working across jurisdictions which helps us in drafting the inter-company agreements.
Resident companies incur tax costs outside India which is lost if not claimed against the Indian taxes due by them on their return of income. However, claiming the tax credits is complicated as it involves the double tax avoidance treaties along with the Indian tax laws. Also, there are filings to be done in this regard with the revenue authorities.
Cross border transactions with associated enterprises are critically examined by the tax authorities for any transfer pricing issues. Transfer pricing policies can be either transaction based or a combined approach for similar transactions. The various methods of transfer pricing include the comparable uncontrolled price method (CUP), resale price method, cost plus method, transactional net margin method, profit split method and any such method as prescribed by the tax law. Depending on the transaction, the most appropriate method is selected.