01 February 2016
My client (Indian Company) is getting testing services (scientific/lab testing-Pharma related) from Austria.....Austria company is having PAN and don't have TRC. 1.what is the rate of TDS if Austria company having TRC and what is the rate of TDS if not having TRC 2.what is the article no (which specifies testing services/scientific/R&D)
Dear experts your early response to my query is highly appreciable...
02 February 2016
In case of withholding tax rate as per DTAA between India and Austria is as below: 1. If the beneficiary submitted PAN and TRC: 10%+ EC+SC (if payment > Rs. 1 crore during the PY); 2. If either PAN or TRC is not submitted then 20% + EC+SC (if payment > Rs. 1 crore during the PY); 3. Applicable article is 12 of the DTAA;
TRC application link in Austria http://www.ufg.ac.at/fileadmin/media/zentrale_verwaltung/finanzabteilung/ZS-AE_certificate_of_residence.pdf
02 February 2016
If testing is carried out in Austria and Austrian company is not having any business connection in India and no permanent establishment in India, the payment is not taxable in India hence no TDS applicable.
02 February 2016
TDS applicable only when the income is taxable in India. Payment to non resident company rendered service outside India is not taxable in India. Please refer the reply and further comments by Suresh to the query TDS on sales commission to foreign agent appearing below search query.
02 February 2016
First and foremost, important one: When TRC of Austria is not available, there is no use of applying the provisions of DTAA between India and Austria.
Concept of DTAA: Income is taxable on residence rule and the same is also taxable on source rule. To avoid hardship on the tax payers, most countries entered into a bilateral agreement called double taxation avoidance agreement (DTAA). These agreements normally provide for charge / levy of income tax on an assessee at lesser or special rates by source countries and at normal rates in force by country at which the assessee is a resident.
Bilateral relief is available in the DTAAs. Credit for taxes paid at ‘source country’ will be available to the deductee. Such credit will be given by the country where assessee is a resident as per ‘tax credit method’. Amount of credit available is average rate of tax in the source country and average rate of tax in the resident country, whichever is lower.
There is one more method i.e. tax exemption method which is applicable for immovable property referred to in article 6 (most DTAAs). Here tax is applicable where immovable property situated;
I understood, what Mr. Seetharaman sir referring i.e. Business Profits under article 7 (most DTAAs including India and Austria). In case of business profits, they shall be taxable only in the country of residence, unless the assessee carries on business in the source country through a permanent establishment situated therein. If the assessee carries on business as aforesaid, the profits of the assessee may be taxed in the source country to the extent it is attributable to that permanent establishment.
Bringing agency commission under this rule is depending on the risk taking capacity of the assessee.
Mr. Madhav referred to ‘testing services….’ received from Austria. It falls under the article 12 not under the article 7. If the services referred to in article 12 is operating / providing through a permanent establishment then such income falls under article 7 or under article 14. In such a case Mr. Seetharaman Sir is right.
This is my view, rest is in the hands of the assessee, based on its risk taking capacity.
02 February 2016
Dear Mr.Ram Pavan Kumar & Seetaram, Thank you for your valuable Information...But I have a small doubt, I think if the NR not having TRC & PAN sec 206AA is not applicable and prevailing tax rates of 25% ➕ education cess is applicable...if correct me if I am wrong...20% TDs rate is applicable (206AA) if the NR having TRC and not having PAN.
CAclubindia
