CA SUDHIR HALAKHANDI (PRACTICING CHARTERED ACCOUNTANT) 29 January 2009
BINOY CHACKO (Co-Founder) 06 July 2009
Julia (lawyer) 03 November 2009
Could you please give me an idea on the following?
An LLP is registered in
Sunil (Trader) 04 November 2009
LLP = Firm (In India).
For assessment year 2009-2010, I doubt if any LLP has to file a return. For 2010-2011, everything will become clear when a new form is notified. Till then wait. However, dolet me know what the status is for filing application for a new PAN.
In USA they call registered limited liability partnerships as LLC (Limited Liability Company). When dealing with one be careful. If there are more than 2 partners then it is a distinct entity. If it is a Single Owner LLC it is classified along with a proprietorship as a disregarded entity or entity disregarded as being separate from the individual.the only difference is that it is registered name under which the owner does business.
Julia, you have to comply with all statutory compliances of the State of incoporation of the entity even if the effective control is non-resident. There is no condition of PE in this case. PE is a condition only if the entity is not incorporated or resident of the other contracting state.
For Income Tax please refer to Article 7 of most DTAAs regarding Business Profits. Business profits of an enterprise in one state can be taxed only in that state. Therefore if UK laws compel you to file a nil return if you have no activities, you will have to file one. If there is taxable income occuring in UK or any other jurisdiction you can claim relief for taxes suffered in any other jurisdiction with which UK has a DTAA. This can be for Business Profits as per Article 7 on account of having PE in another jurisdiction. Refer to Article 5 for definition of PE.
Certain receipts may suffer in the other jurisdiction even if there is no PE. These are incomes as per Article 13 for Royalties and Technical Services (that alsoincludes Managerial Services) and for Independent Professional Services (Article 15)that includes Lawyers, teachers, Accountants, Doctors, Medical etc.
You can claim relief for taxes paid to other contracting states eligible to tax your receipt when you file your UK returns. However,if you file a tax return in the other jurisdiction and claim refund of part or all of the taxes, your relief will be reduced to the extent of the refund. granted.
International Taxation is a complicated subject and full of litigations. It is better you comply with laws for statutory compliance every where you do business directly or have a presence like a branch or incorporated entity.
You should also note that the new DTC proposes to tax non-resident companies having effective place of management or control in India. From plain reading, this seems to be as follows in your case when the DTC is passed, assuming that all the directors (partners) controlling the UK Company are resident in India:-
1) You will also have to file the income tax return in India in addition to the return filed in UK.
2) You will be taxed at rates applicable to foreign companies.
You will be elegible for relief for taxes paid to UK or other jurisdictions with which India has a DTAA or as per provisions of the New DTC.
I will not be able to guide you more about this situation unless new DTC is enacted. However, it will be interesting to note other views on this.