No Permanent Establishment Declaration from the non-resident payee under DTAA

Prashant Shah | Last updated: 19 June 2020

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This document is a declaration for Indian income tax purposes, confirming that a non-resident payee does not have a permanent establishment in India. It asserts tax residency in another country under a Double Taxation Avoidance Agreement (DTAA) and confirms eligibility for DTAA benefits. The declaration also states that key management decisions are made outside India and that the arrangement isn't an impermissible avoidance.

On the Letter Head of the Payee

Date:
To
Name of Payer
Address of the Payer

Dear Sir/ Madam,

Re: Declaration for Indian income-tax purpose in relation to the income on account of the services provided by us.

We hereby confirm that:

1. [Name of Payee] is a tax resident of [Country Name] in terms of Article [Number] of the Double Tax Avoidance Agreement entered between the Government of [Country Name] and the Government of India ('Tax Treaty').

2. [Name of Payee] holds a Tax Residency Certificate ('TRC') bearing reference number [Number] from the [Authority name] of [Country name], confirming its tax residency under the Tax Treaty for [Period] and will continue to maintain “tax resident” status as per his/ her/ its respective Country for the application of the provisions of the Tax Treaty during the FY 2020-21.

3. [Name of Payee] is eligible to claim benefits under the provisions of the Tax Treaty.

No Permanent Establishment Declaration for DTTA Benefits

4. [Name of Payee] is the ultimate beneficial owner of its shareholding in the Company and income receivable from the Company.

5. [Name of Payee] does not and did not at any time have a permanent establishment or taxable presence in India during the FY 2020-21 as provided in the Tax Treaty.

6. [Name of Payee] has place of effective management in [Country name] and not in India i.e. all the key management and commercial decisions, which are necessary for the conduct of the business, are in substance made in [Country name].

The arrangement of the [Name of Payee] is not covered under impermissible avoidance arrangement as per India domestic law.

We hereby confirm that the above information is true to the best of our knowledge and belief. In case of any change in the facts stated above, we will inform you immediately.

[Name of Payee] undertakes to provide any further documentation or information as the Company may request.

Any liability arising on account of misrepresentation of facts by us in the above declaration would be indemnified by us.

For

Authorised Signatory
[Name & Designation]
Contact Number:
Contact Address:
Contact E-mail:

FAQ :

The purpose is to confirm for Indian income tax purposes that the payee is a tax resident of another country and does not have a permanent establishment or taxable presence in India, allowing them to claim benefits under a Double Taxation Avoidance Agreement (DTAA).

A Tax Residency Certificate (TRC) is a document issued by the tax authority of a country confirming that an entity or individual is a tax resident of that country for a specific period and for the purposes of a Tax Treaty.

A permanent establishment refers to a fixed place of business in India through which the business of the non-resident payee is wholly or partly carried on. The declaration confirms that such a presence does not exist.

The place of effective management refers to the location where key management and commercial decisions necessary for the conduct of the business are made. This declaration states that this place is in the payee's country of residence, not in India.

The payee undertakes to indemnify any liability arising from misrepresentation of facts in the declaration and agrees to inform the payer immediately of any changes to the stated facts.

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About the Author

Prashant Shah

Proprietor Prashant Shah & Co

I am a CA in practice based out of Mumbai. My focus areas areTaxation and Audit with special interest in International Taxation.I have previously worked with EY and Deloitte in the Statutory Audit function.

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