Significance economic presence

Summary: Whether the payment attracts TDS depends on whether it is a "pure reimbursement" (no profit element, supported by original bills) or a payment for services/royalty. SEP is a broader threshold test that determines if the non-resident is liable to pay tax in India on their business income; it does not automatically make every reimbursement subject to TDS. Documentation is the most important factor in proving a payment is a non-taxable reimbursement.