Foreign taxes

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Nandakumar T S (Querist)
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17 July 2015 I represent a Pharma Consultancy Company providing end to end GxP solutions to pharma companies globally.
One such overseas project has encountered a Tax liability at source on our Professional Fee paid in milestones as per Consulting Agreements.

Request Forum to advise on how DTAA between India & South Korea functionally assists in this scenario.

Can we ask the Korean counterpart to process all remittances after absorbing all such taxes on their books to their cost without impact on fee??

Request your expedited suggestion and valuable advice ASAP

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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17 July 2015 As per article 15 of DTAA with Korea it is taxable only in India.
You can ask your Korean counterpart to absorb all such taxes.

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Nandakumar T S

Nandakumar T S (Querist)
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17 July 2015 Dear Mr. Seetharaman,

Thanks for your quick response.

However Article 15 refers to Dependent Personal Services (Individual).

Please suggest if it still holds good for a corporate or Consulting Firm.

Regards
Nandakumar

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Nandakumar T S

Nandakumar T S (Querist)
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17 July 2015 Dear Mr. Seetharaman,

I would also appreciate your valuable feedback on the revised DTAA between the 2 countries post Cabinet Decision in May'15 with regards to Article 15 with a suitable link to view the revision.

Thanks
Nandakumar

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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17 July 2015 I am not getting latest DTAA see whether article 23 applies.

Nandakumar T S

Nandakumar T S (Querist)
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17 July 2015 Dear Mr. Seetharaman,

Thanks for your feedback.

If my company is to be constituted under Article 13 since our services are categorised under a Technical Consulting Agreement are we still liable for Taxation in Korea (other contracting state).

Your response will poise us in a favorable stance.

Regards
Nandakumar

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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17 July 2015 Yes your are right Article 13 applicable to you. Hence 15% tax payable in Korea.

Nandakumar T S

Nandakumar T S (Querist)
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17 July 2015 Dear Mr. Seetharaman,

If so how do we reconcile this tax burden as per our IT system in case the Korean Counterpart refutes to absorb or book tax to their expense??

Regards
Nandakumar

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CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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17 July 2015 You can claim relief to the extent of tax paid in Korea while paying tax in India. So you will not lose anything.

Nandakumar T S

Nandakumar T S (Querist)
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17 July 2015 Thanks...
In this case guess demand for Tax Certificate is required to claim relief...

Thanks
Nandakumar

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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17 July 2015 Yes you will be able to get that certificate.
For filing the return it is not required.

Nandakumar T S

Nandakumar T S (Querist)
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20 July 2015 Good Morning !!!

Please help us understand how to reconcile Tax avoidance on sample revenue calculation below :

For 2015-16 Project Value for Technical Consultancy Services in USD - 500000.00

Korea Withholding Tax as per revised DTAA May'15 - 10%
Remittance by Client for the year - USD 450000.00

EEFC to INR Conversion at our end @ current IBR INR 63.20 / Dollar - INR 2,84,40,000.00

PBT @ INR 5688000.00

Need your assistance to understand procedure followed to avoid double taxation on profit before tax (PBT) stated above?

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CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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20 July 2015 Your tax payment in Korea is 50,000*63.20=31,60,000.
You have to calculate the Indian tax payable on the Korean income included in your tax working.
Which ever is less will be allowed as relief in your Indian tax payment.
Suppose the entire PBT is on account of income from Korea and the tax payable on this income at 30% works out to 17,06,400 the entire 17,06,400 will be allowed as relief and no further tax payable in India on this income.

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