No PE Certificate
May 5, 2021|
11 mins read
What is a No PE certificate India ?
No PE Certificate or No PE Declaration, is a certificate given by a non resident , who is deriving any income from India (which could be interest, Fee for Technical Services, Business Income etc., ) , which enables the Indian payor, to with hold tax at a lower rate applicable to a particular income. A generic NO PE CERTIFICATE FORMAT can be obtained at the end of this Post, but if you would like to have a specific No PE Certificate Format, you can Avail our services to prepare No PE Certificate and Form 10F
Generally, if a non resident derives business income from India, and also has a Permanent Establishment in India, taxes are to be withheld @ 40% of net income of the non resident (plus applicable surcharge and cess). In the absence of details of Expenditure related to the income earned from India, such payments may be liable to tax @ 40% of gross payments, unless the non-resident obtain a lower withholding tax certificate from the Income Tax Department.
Warning : – One should have proper evaluation of tax implications as low deduction of tax is a liability on You , and not the recipient. Vodafone/ Cairn , which struggled for more than a decade are now looking at an agreement with Indian tax office , wherein the claims for non-deduction of taxes from payments for purchase of shares would be settled through change in law. The same benefit shall not be available to payors due to change in the law.
No PE Certificate for income taxable at lower rates on a gross basis
However, certain payment in the nature of fee for Technical Services, royalties, interest etc are taxable at a lower rate of 10-15% of the gross payment. This benefit however is available only when non resident does not have a PE in India. Therefore in such a case, no PE Certificate is required to be obtained by the Indian payor, to apply the lower gross rate of tax applicable to such payments.
No PE Certificate for business income
Similarly, in case the non resident does not have a permanent establishment in India, the business profits would not be liable to tax in India. In such cases as well, no PE Certificate is required to be obtained by the Indian payor, to apply Nil rate of tax applicable to such payments.
The format of the No PE Certificate India or No PE Declaration is as under : –
NO PE CERTIFICATE / NO PE DECLARATION FORMAT – DRAFT VERSION – THIS VERSION SHOULD BE SUITABLY MODIFIED CONSIDERING THE IMPACT OF MULTILATERAL INSTRUMENT SIGNED BY INDIA WITH VARIOUS COUNTRIES Avail our services to prepare No PE Certificate and Form 10F
Warning : – The format should be evaluated by a Professional based on your specific format as low deduction of tax is a liability on You , and not the recipient.
Name of the Indian party
We refer to the consideration payable to us under the “<<<<<<>>>> Agreement” for <<<<>>>>>>. In this connection , we do hereby confirm as under:
We are a company incorporated under the laws of the <<<>>>> and << Please provide other details relating to the principal office , whether you are a tax resident of given country, details regarding your Tax Identification Number etc.
We qualify as tax resident of <<<<>>>>> in terms of the India and <<<<>>>> Tax Treaty for the avoidance of double taxation (“Tax Treaty”) and do not qualify as a “resident” of India under Section 6 of the (Indian) Income Tax Act, 1961. We are, therefore, eligible to invoke the beneficial provisions of the Tax Treaty in respect of any income derived from India for the period <<<<<<<<<<>>>>>>>>>>.
We do not have a PE in India . Please provide the facts relating to
- Any office or other fixed place of business in India as envisaged in Article 5 of the Tax Treaty.
- Any dependent agent performing activities in India which may constitute a dependent agency Permanent Establishment ;
- Other declarations relevant to the respective income ;
In view of the above, <<<< Please certify the relevant assertions including your tax residency , existence of PE in India under the provisions of Tax Treaty , and the period for which income is earned .
In the event of any change in the above position, we will inform you in writing.
For Name of the Company
Name of person signing the NO PE Certificate
Designation of the Person signing
In addition to the No PE Certificate India / or No PE Declaration, the Indian payors would generally require the foreign recipient to provide certain additional documents as under : –
- Form 10F
- TRC or the Tax Residence Certificate of the country of the recipient
- Information to be provided under Rule 37BC.
All these documents can be prepared by an Indian tax consultant based on your specific facts. If you need our services for Documentation Assistance
Under the Indian law, Rule 37BC provides for certain relaxation from deduction of tax at higher rate , under section 206AA to a non resident or a foreign company recipient , who do not have a Permanent Account Number in respect of the following payments : –
- Royalty, fees for technical services
- Dividend ; and
- Payments on transfer of any capital asset.
The above exemption is available if the recipient provides certain specified details and documents to the deductor .
We hope this Article on No PE Certificate India would have been useful.
For any queries, please write them in the Comment Section or Talk to our tax expert