foreign operations

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mikdad merchant (Querist)
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19 December 2010 Hello experts,

If an indian co. wants to conduct business in another country(with which DTAA exists), which of the following is a better option from the perspective of taxation:-
1. Opening a foreing branch or
2. Float a whlly owned subsidary in that country.
Well.... according to me a branch would be a better alternative as a subsidary would amount to taxation of profits twice( i.e once in the foreign country and second in indian when dividend is declared, and if DDT exist in that country than it would be taxed twice).
Pls give your views on the same

CA. Anuj Gupta

CA. Anuj Gupta (Expert)
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20 December 2010 You are correct to the extent of DDT, but for that you will have to study the local tax provisions of that country in detail and even take help of a professional in the foreign country for the same.

The ultimate answer shall emerge only after studying the exact nature of tax regime of foreign country and the unlimited liability the Indian company is willing to take by having a branch in foreign country.

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