For a US company operating in India, a Permanent Establishment (PE) is created under India-USA Tax Treaty depending on several factors. The top question and indicative ideas around them are summarised in this Q&A Format
What is a Permanent Establishment (PE) for a US company doing business in India under the India-USA Tax Treaty ?
For a US company operating in India, a Permanent Establishment (PE) is created under India-USA Tax Treaty if the business maintains a “fixed place of business” in India, such as an office, factory, or branch. This physical location would result in the company being subject to Indian taxes on profits attributable to the activities conducted from that location.
Need assistance in understanding how your US business may create a PE in India? Contact Sorting Tax Advisory for expert guidance.
What locations would qualify as a Permanent Establishment (PE) for a US company in India ?
A US company’s PE in India could include a place of management, branch, office, or factory. Additionally, construction or installation projects that last more than 120 days in a 12-month period would also establish a PE for the US business, making it liable for Indian tax.
Unsure if your business operations qualify as a PE? Reach out to Sorting Tax Advisory for professional tax advice.
Can providing services in India create a Permanent Establishment (PE) for a US company?
Yes, if a US company provides services in India for more than 90 days within a 12-month period, either through its employees or contractors, it can create a PE in India. The company would then be taxed on the income generated from those services in India.
Need help navigating service-related PE rules? Get in touch with Sorting Tax Advisory today.
What activities are excluded from creating a Permanent Establishment (PE) for a US company in India?
Certain activities, such as storing goods for display or storage, or maintaining a fixed place for activities like advertising or research, do not create a PE. If the US business’s presence in India is limited to these preparatory or auxiliary activities, it would not be taxed as a PE.
Curious if your business qualifies for these exclusions? Consult Sorting Tax Advisory for clarity.
Can a US company create a Permanent Establishment (PE) through an agent in India?
A US company can create a PE in India if its agent in India regularly concludes contracts on its behalf or maintains a stock of goods for delivery. However, if the agent is independent and acts in the ordinary course of business, the company would not have a PE in India.
Worried about the implications of using an agent in India? Sorting Tax Advisory is here to help!
Does a construction project create a Permanent Establishment (PE) for a US company in India?
Yes, if a US company undertakes a construction, installation, or assembly project in India that lasts more than 120 days within a 12-month period, this would create a PE. The company would be subject to Indian tax on the profits derived from that project.
Working on a long-term project in India? Consult Sorting Tax Advisory to avoid tax complications.
What is the importance of a “fixed place of business” for a US company in establishing a Permanent Establishment (PE) in India?
A US company needs a “fixed place of business” in India to establish a PE. This could be an office, factory, or branch. Without a permanent physical location, the company may avoid being classified as having a PE in India, and thus avoid tax on Indian-sourced profits.
Want to ensure your fixed place of business is compliant? Speak to Sorting Tax Advisory for expert advice.
Can a US company automatically create a Permanent Establishment (PE) in India by being related to an Indian company?
No, simply being related to or controlling an Indian company does not automatically create a PE for a US business in India. A PE would only be established if there is a fixed place of business or other qualifying activities in India.
Unsure about the impact of related companies on PE status? Sorting Tax Advisory can provide tailored insights.
Does natural resource exploration in India create a Permanent Establishment (PE) for a US company?
If a US company is involved in the exploration or exploitation of natural resources in India, a PE is created if the operation exceeds 120 days within a 12-month period. The company would be liable for Indian taxes on the income generated from these activities.
Planning natural resource exploration in India? Contact Sorting Tax Advisory for tax guidance.
What are the tax implications for a US company having a Permanent Establishment (PE) in India?
Once a US company has a PE in India, it will be subject to Indian tax on the profits attributable to that PE. This taxation is based on the income generated from the company’s business activities in India, with the aim of avoiding double taxation under the India-USA Tax Treaty.
Need expert assistance with tax implications? Sorting Tax Advisory can help navigate your tax responsibilities.
