Withholding tax on supervision charges
This query is : Resolved
19 October 2012
An Indian Company has to pay Supervision charges to a company of UAE. UAE company has no PE in India and is providing tax residency certificate of UAE. Is still there withholding tax liability on the Indian company?
19 October 2012
Payment made to foreign company for service rendered in the nature of business not chargeable to tax in India in the absence of permanent establishment
Payment made to foreign company for service rendered in the nature of business not chargeable to tax in India in the absence of permanent establishment
19 October 2012
Thanks a lot Sir. Here I would like to add that the supervision services are rendered in India only. The technical persons from UAE visit India and provide supervision services. In that case, would there be any withholding tax liability and at what rate?
19 October 2012
If the receipient does not have permanent establishment or business connection in India then TDS will not be deducted
19 October 2012
Thanks a lot. But the services are being rendered in India. The supervising UAE company is sending their technical persons to India for rendering services. Doesn't it creates the liability of withholding tax according to Sec 9(1)(vii).
03 August 2025
Great question! Here’s how withholding tax applies on supervision charges paid to a foreign company (UAE) whose technical personnel come to India:
---
### Key Points:
1. **Nature of Service & Place of Rendering:**
Since the UAE company’s personnel physically come to India and provide supervision services here, the **service is rendered in India**.
2. **Permanent Establishment (PE) and Business Connection:**
* If the UAE company **does not have a PE in India**, technically the income may not be taxable as business income under normal rules.
* However, **services rendered physically in India** generally attract withholding tax under **Section 195** on the entire payment made to the non-resident.
3. **Section 9(1)(vii) of Income Tax Act:**
This section states that income is deemed to accrue or arise in India if any services are rendered in India. Hence, **supervision services rendered in India attract tax in India**, irrespective of PE.
4. **Withholding Tax Liability:**
* The Indian company **is liable to deduct TDS under Section 195** on the gross amount paid to the UAE company.
* The rate of TDS depends on whether there is a DTAA between India and UAE and its provisions.
* Without DTAA benefits, it is typically **30% + surcharge + cess** on the gross payment.
5. **Tax Residency Certificate & DTAA:**
* The UAE company’s tax residency certificate helps to claim benefits under the **India-UAE DTAA** if applicable.
* DTAA might reduce the withholding tax rate or exempt it subject to conditions like whether the UAE company has a PE or not.
---
### Conclusion:
* **Yes, TDS is applicable on supervision charges paid to the UAE company if the services are rendered in India.**
* Absence of PE does not remove withholding tax liability on payments for services rendered physically in India.
* Check the **India-UAE DTAA** to see if reduced TDS rates or exemptions apply.
---
If you want, I can help you find the exact DTAA clauses or model language explaining this. Would that be helpful?
---
### Key Points:
1. **Nature of Service & Place of Rendering:**
Since the UAE company’s personnel physically come to India and provide supervision services here, the **service is rendered in India**.
2. **Permanent Establishment (PE) and Business Connection:**
* If the UAE company **does not have a PE in India**, technically the income may not be taxable as business income under normal rules.
* However, **services rendered physically in India** generally attract withholding tax under **Section 195** on the entire payment made to the non-resident.
3. **Section 9(1)(vii) of Income Tax Act:**
This section states that income is deemed to accrue or arise in India if any services are rendered in India. Hence, **supervision services rendered in India attract tax in India**, irrespective of PE.
4. **Withholding Tax Liability:**
* The Indian company **is liable to deduct TDS under Section 195** on the gross amount paid to the UAE company.
* The rate of TDS depends on whether there is a DTAA between India and UAE and its provisions.
* Without DTAA benefits, it is typically **30% + surcharge + cess** on the gross payment.
5. **Tax Residency Certificate & DTAA:**
* The UAE company’s tax residency certificate helps to claim benefits under the **India-UAE DTAA** if applicable.
* DTAA might reduce the withholding tax rate or exempt it subject to conditions like whether the UAE company has a PE or not.
---
### Conclusion:
* **Yes, TDS is applicable on supervision charges paid to the UAE company if the services are rendered in India.**
* Absence of PE does not remove withholding tax liability on payments for services rendered physically in India.
* Check the **India-UAE DTAA** to see if reduced TDS rates or exemptions apply.
---
If you want, I can help you find the exact DTAA clauses or model language explaining this. Would that be helpful?
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