ctc workshop on taxation of foreign remittances brains ... · pdf file21 january 2017 ctc...

21 January 2017

CTC Workshop on Taxation of Foreign RemittancesBrains Trust Queries

2© 2017 Deloitte Touche Tohmatsu India LLP

Issues relating to Permanent

Establishment (Article 5)

• Paragraph 26.1 of OECD

Commentary 2014 on of Article 5(4)

• Exclusion to PE Article - para 4(a) to

Article 5

• German Pipeline case - Rohrleitungs

- Entscheidung

3© 2017 Deloitte Haskins & Sells LLP

Issue 2.1

UAE Oil Company

India

Supplies oil through

underground pipeline

located partly in UAE

and partly in India

Oil transportation

regulated from UAE

No personnel of UAE

Co. in India

All technical and

business administration

exercised by personnel

located in UAE

All maintenance and

repairs on pipeline

network located in India

performed by

Independent

contractors

• Article 5 (1) of OECD Model

Convention

• Essential characteristics of a

permanent establishment - Article 5,

Para 2 of Commentary on OECD

Model 2014

• Illustrations in the Commentary on

OECD Model 2014

o paragraph 4.5

o paragraph 5.2

o paragraph 6.1

o paragraph 4.1


Issue 2.2

Singapore

Consultancy Co.

Polish National

Railway Co.

Provides IT and

Communication

services

One of the employee is

often in Warsaw.

However each visit

never lasts for more than

a week and all visits in a

12 month period do not

exceed 3 months

Most of the

work is done

at Co.’s

facilities in

India

India


Issues relating to Business Profits

(Article 7)

• POEM

• The exclusion refers to activities of

“purchase of goods in India” and

not “purchase of goods from

India”.

• SM Energy Teknik & Electronics

Ltd. [2006] 10 SOT 679 (MUM.)

• Unilateral Foreign Tax Credit


Issue 3.1

I Co.

HK Co.

Appointed Manager

to look after sales

operation

Handles

Purchases

India

Hong Kong

Directors are

located in India

• Micoperi S.p.A. Milano v.

DCIT [2002](Mumbai ITAT)

82 ITD 369

• Mc Dermott ETPM Inc. vs.

DCIT [2005](Mumbai ITAT)

92 ITD 385

• Wavefield Inseis ASA, In re.

(AAR) [2010]187 Taxmann 62

• Louis Dreyfus Armateures

SAS vs. ADIT, International

Taxation [2015] 54

taxmann.com 366 (Delhi -

Trib.)

• Pride Offshore International

LLC vs. Additional Director of

Income-tax, International

Taxation, Dehradun [2015] 59

taxmann.com 23 (Delhi -

Trib.)7© 2017 Deloitte Haskins & Sells LLP

Issue 3.2 and 3.3

Italy Oil Co.

Italy Soil

Services

Subcontracts drilling

activities to another

Italian company

Awarded contract for

drilling offshore oil

wells

India

India

Outside India

ONGC

Dutch Co.


Issues relating to Shipping & Air

Transport (Article 8)

• Section 172 of the Income-tax Act,

1961

• Section 44B of the Income-tax Act,

1961

• CIT vs. Taiyo Gyogyo Kabushiki

Kaisha [2000] 244 ITR 177 (Kerala)

• Paragraph 13 of Article 8(2)

(alternative B) of Commentary on UN

Income and Capital Model

Convention (2001)


Issue 5.1

Dutch Co.

Ports

Unscheduled visits

to Indian ports 7

times during a year

to drop off or

collect cargo

India

Netherlands

• ACIT v. Kin Ship Services (I) (P) Ltd.

(31 SOT 375) (Cochin)

• Poompuhar Shipping Corporation Ltd

[2013] 38 taxmann.com 150

(Madras)

• OECD Commentary 2014 -

Paragraph 5 of Article 8(1)

• Article 12 or Article 7 of OECD Model

Convention


Issue 5.2

Air X

Air Y

Leases an aero

plane and levies

20% withholding

tax on the lease

payment

Country Y

Country X

OECD Model

Treaty


Issues relating to Dividend (Article

10)

Issue 6.1

• OECD Commentary 2014

– Article 10(3), Paragraph

24

• Article 11(3) – Definition of

Interest

© 2017 Deloitte Haskins & Sells LLP 12

Company X

Company Y

Pays dividend

of 100 in

respect of profit

sharing bond

Country B

Country A

Income from Profit

sharing bonds is

considered as

dividend under

domestic income tax

legislation and

imposes 25%

withholding tax on

gross amount of all

dividend payments

Both the

countries have

entered into a

DTAA identical

to OECD

model DTAA

Issue 6.2

• Section 6(3) of the

Income-tax Act, 1961

• Article 4(3) of the

OECD Model

Convention

• Article 10 of the OECD

Model Convention


Norway

Swiss

Management and

Control moved to

India

India

Dividends subject to WHT of up to 10% under India-Switzerland DTAA

Dividends paid in respect of 20% or more corporate interest in the Capital of Swiss Company are exempt from tax

under Norway-Switzerland DTAA

Dividend from

Swiss to Norway


Issues relating to Triangular

Situation

Issue 9.1

• OECD Commentary

2014 – Article 24 (3)

Para 69 to 71

• Relief by PE State

• Relief by State of

Residence


Indian PE /

branch office

Japan Co.

US Co.

India

Japan

United States


Issues relating to EPC Contracts

• Linde AG 44 taxmann.com 244

(Delhi HC) order dated April 23,

2014, Dongfang Electric

Corporation (2012) 23

taxmann.com 170 (Kol) order dated

June 22, 2012, Nokia Networks OY

(2012) 253 CTR 417 (HC Delhi)

order dated September 7, 2012

• Ishikawajma- Harima Heavy

Industries Ltd. (2007) 288 ITR 408

(SC)

• Ashapura Minichem Ltd. v. ADIT

[2010] 40 SOT 220 (MUM.),

Inspectorate (Shanghai) Limited

AAR No.1005 of 2010, Guangzhou

Usha International Ltd. A.A.R. No

1508 of 2013

• Principle of generalia specialibus

non derogant

• BEPS Action Plan 7


Issue 10.1

Composite

EPC

Contract

Offshore

supply

Offshore

services

Onshore

supply

Onshore

services

Supply

and

services

rendered

outside

India

Supply

and

services

rendered

in India


Issues relating to Tax Deducted at

Source

Issue 11.2

• Section 90(4) of the Act

• Section 206AA of the Act


Lagaan Ltd

Hostile Ltd

India

Foreign

company

Pays participation

fees for attending

a conference

outside India

Does not have a

PE in

Issue 11.5


Payer

Recipient

No PE

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ctc workshop on taxation of foreign remittances brains ... · pdf file21 january 2017 ctc...

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