International taxation

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cheshta (Querist)

17 January 2014 Dear Experts,

I have a query on tax applicability in an international Transaction.

My Indian company has entered into an agreement to provide services of an inhouse software to a Hong Kong Company.Now when my company will receive payment from Hongkong the taxation issue arises.

There is no DTAA between Hong Kong and India so how will taxation framework operate??

Is my following opinion correct in this regard:-

1.The Hong Kong Company will pay the tax applicable on Indian company Income as per Hong KOng Tax law and after deducting Tax will make the final payment.

2.The Indian Company wont get any credit of that tax and hence will have to pay the tax applicable as per Indian Tax Laws.

Please revert asap.

Thanks in advance

Regards

Cheshta

Vishal

Vishal (Expert)

17 January 2014 Dear Cheshta,

Whether tax shall be deducted or not in Hong Kong would depend on the local laws of Hong Kong.
You have rightly mentioned that their is no DTAA between India and Hong Kong. Hence, the double taxation benefit in the present case shall be guided by section 91 of the India income-tax Act, 1961. You could claim the credit for taxes paid in Hong Kong, however the same shall be subject to the limits prescribed by Section 91.

Trust the above clarifies.

Thanks,
Vishal

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