14 November 2011
we have a contract with UAE branch of a company which has registered office at British virgin islands. payments are made for services to UAE based on the invoices raised from UAE. Can someone suggest whether the DTAA applicablity to be seen with UAE since payments are made to that country or with British virgin islands where the registered office of the company is situated?
15 November 2011
To answer this query, first question to be dtermined is whether UAE branch is tax resident in UAE as per India- UAE tax treaty. The likelihood of branch been tax resident of UAE is remote. Accoridingly, the branch is non -resident in UAE, which means the India-UAE tax treaty will not apply.
Since, India has no treaty with BVI, the indian domestic tax provisions will apply. As per section 115A(1)(b) the tax deduction of 10% (plus surcharge and cess) is required to be done before making the payment to UAE branch. In case the UAE branch has no PAN in India the tax deduction would be rate of the 20% (u/s 206AA) of the Act.
CAclubindia
