Taxability of foreign business income

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Avinasheswar (Querist)
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04 May 2009 If an Indian company is the only and 100% shareholder of an establishment regitered outside India, will the whole income from such establishment outside India be taxed as profits/gains of the 100% holding company? or is it that only the profits which are repatriated into India will be taxed?

Ca Anand Dubey

Ca Anand Dubey (Expert)
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05 May 2009 1. Establishment outside india (subsidiary) will pay tax in that country.
2.Holding co. (shareholder) has to follow the tax regulation on dividend (if received)and on return on investment
3. We have to check DTAA also

Avinasheswar

Avinasheswar (Querist)
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05 May 2009 How will this apply if the foreign country is UAE? UAE is a country where there is no corporate or personal income tax.
Also is not return on investment for the holding company same as the profits gained by the establishment outside India because the holding company holds 100% ownership?
Similarly what is the implication of DTAA in case the establishment is registered in UAE in this case?

taxindiaconnect

taxindiaconnect (Expert)
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09 May 2009 The business income of a 100% subsidiary is taxable only in the state where the the subsidiary is registered. In case of UAE, since no tax is attracted on the income in Duabi. No tax is payable in Dubai.

As article 7 of DTAA between India and UAE business income of the a resident of UAE will be taxable only in UAE.

A subsidiary is a separate legal entity from the holding company, its profits can not be taxed in India even if 100% shares are held by holding company in India

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