Taxability of foreign business income
This query is : Resolved
Avinasheswar
(Querist)
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
(Expert)
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
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
(Querist)
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?
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
(Expert)
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
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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