Do we have to pay TDS to Japan,

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This discussion clarifies whether a small UK private limited company needs to pay Tax Deducted at Source (TDS) in Japan for services provided to a Japanese client. The consensus is that quality control and similar services can be considered technical services under Article 12, making TDS payment in Japan mandatory. While relief for Japanese TDS can be claimed against Indian tax liability, it's important to note that TDS is generally not applicable to the export of goods themselves. The advice also touches upon managing cash flow by reducing advance tax payments and obtaining the necessary TDS certificates from the Japanese company.

deepak d.l

deepak d.l (Querist)

09 December 2021 We are very small pvt ltd company, we are working with Japanese company.
we are new company need your support to understand the rule better.
recently our client asked us that they will be deducting TDS Under ARTICLE 12
ROYALTIES point 4 & 6.

our nature of business is, we help our client to manufacture raw materials, and maintain quality control in India and export the raw materials/products to other parts of the world through us or manufacturer.

request the experts give the opinion on TDS.
1. Do we have to pay TDS in Japan under ARTICLE 12, ROYALTIES point 4 and 6?
2. If we pay the TDS in Japan, can we get the rebounds in India?
3. what are the advantage and disadvantage if we pay in TDS?

Please help me to understand
Thank you in advance.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

09 December 2021 1 yes, you have to pay TDS in Japan under fees for technical service under Article 12.
2 yes, relief can be claimed for the TDS in the tax payable in India ( tax payable in India can be reduced to the extent of TDS in Japan)
3 No advantage or disadvantage. You have to comply with tax rules.

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deepak d.l

deepak d.l (Querist)

09 December 2021 Thank you so much for your Quick reply.
1. Even though we are not giving any technical service to them, is it mandatory to pay TDS in Japan or can we request the Japanese company to pay us fully and pay the taxes in India under Article 7.

2.We are also helping other clients in similar manner, they have not Deducted any TDS from us.

3. If we have to pay the TDS of 10% in Japan doesn't it disrupt the cash flow for the exporter to export the product to parent company?

4.What is the best way to not pay the TDS in Japan and pay the taxes India in that way we wont be having cash flow problem.

5. How long it takes for us claim the TDS in India, what are the documents that we take it from Japanese company?

Thank you so much R Seetharaman

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

09 December 2021 1 Quality control is a technical service. It's mandatory to pay TDS in Japan.
You can't make any such request.
2 Such TDS may not be there in other countries.
3 No cash flow disruption. You reduce advance tax payment to the extent of TDS.
4 Best way' suggested above.
5 Reduce the amount in advance tax.
Obtain TDS certificate claim it in ITR.

deepak d.l

deepak d.l (Querist)

09 December 2021 Thank you so much.
it's a great help to making me to understand the rules.

1 As apart of this we might also be exporting the product to Japan and European countries, but we will be paid from Japan.
Ex: If we rise invoice for 10lakh for exporting the product will they collecting TDS on it.
2. will the TDS to be collected only against the technical service invoices.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

09 December 2021 1 TDS not applicable on export of goods.
2 yes.

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deepak d.l

deepak d.l (Querist)

09 December 2021 Thank you So much.

1. Will the TDS be applicable on research and procure materials in India.
2. Will the TDS be applicable for business development and managing the other companies if we are receiving the payments from Japan

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