Permanent establishment costly despite shutdown

By Sumes Dewan, KR Chawla & Co
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Foreign companies operating in India should carefully structure their operations with an eye on the tax collector. Shutting down a permanent establishement (PE) does not necessarily allow companies to avoid taxes in India if their proceeds are linked to a PE, even one that has already been shut down.

Sumes Dewan Partner KR Chawla & Co
Sumes Dewan
Partner
K.R. Chawla & Co

A non-resident or foreign company is treated as having a PE or business connection in India under Article 5 of the Double Taxation Avoidance Agreements (DTAA) or under Section 9 of the Income-tax Act, 1961, if it carries on business in India through a branch or sales office, or through an agent (other than an independent agent).

To qualify as a PE, the branch or agent should habitually exercise authority to conclude contracts, deliver goods or merchandise or regularly secure orders in India on behalf of the non-resident principal.

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Sumes Dewan is a partner at KR Chawla & Co Advocates & Legal Consultants. The firm is headquartered in New Delhi and has offices in Chennai and Bangalore as well as a representative office in Singapore.

KR Chawla & Co

Head Office

7th Floor, Kailash Building

26, Kasturba Gandhi Marg

New Delhi – 110 001

India

Tel: +91 11 2335 7658-61

Fax: +91 11 2331 9997

Email: krclo@krcco.com

 

Singapore

9 Temasek Boulevard

#32-01 Suntec Tower 2

Singapore – 038989

Tel: +65 6432 5220

Fax: +65 6332 1485

Email: krlcosingapore@krcco.com

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