Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: due date for vat payment :: ARTICLES ON INPUT TAX CREDIT IN VAT :: cpt :: ACCOUNTING STANDARD :: form 3cd :: TAX RATES - GOODS TAXABLE @ 4% :: list of goods taxed at 4% :: VAT RATES :: Central Excise rule to resale the machines to a new company :: TDS :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: empanelment :: VAT Audit :: ACCOUNTING STANDARDS :: articles on VAT and GST in India
 
 
General »
 Shah gets notices over civic tax dues
 Tax revenue down in first six months after prohibition
 Post demonetisation, Income Tax department sends 30 cases of irregularities to Enforcement Directorate, CBI
 Don’t rush into a new tax without being prepared
 Can’t tax income from palace rent: Supreme Court
  Withdrawal of Legal Tender Character of the existing Bank Notes in the denominations of ₹ 500/- and ₹ 1000/- (Updated as on November 30, 2016)
 Cases for tax scrutiny will be selected by machines
 Time to revisit 1997 direct tax rates, says P Chidambaram
 Lok Sabha passes Bill to tax black money deposits post demonetisation
 Last day to pay property tax with old notes
 Income tax department asks IDS declarants to pay tax by 30 November

Check-up tax issues before Overseas deputation
May, 19th 2010

India is being talked about as the next economic superpower and rightly so. An important indicator of the same being Indian companies becoming multinational companies by making overseas acquisitions. From Hindalco acquiring Novelis, to the Tatas acquiring Corus and now Bharatis acquisition to Zain, Indian companies are continuing their march of establishing a global footprint.

This along with the revival of the software industry has resulted in a lot of Indian employees being deputed abroad for a short term stint. While the employees plan their trip with regard to the visa requirements, climate, culture, language, cost of living, etc of the overseas country, one important point missed could be with regard to the tax implications.

For seconding employees abroad there are host of tax aspects that need to be considered. Summarised are some of the tax issues that should be taken into account prior to the international assignment.

Tax complications

Typically an employee going overseas for a short stint of less than 6 months for the first time would be classified as a 'Resident and Ordinarily Resident' ('ROR') in India and will be taxable on his global income. Accordingly, the individuals income earned outside India would also be liable to tax in India, although the services were rendered outside India. Further, there is a possibility that the income earned overseas would be taxable in the overseas country as per the local tax laws of that country. This could result in double taxation of the same income.

In such a scenario one of the possible ways to avoid double taxation could be to avail an exemption under the 'Dependent Personnel Services' Article of the Double Tax Avoidance Agreement between the overseas country and India, which is also commonly known as short stay exemption. Generally, a short stay exemption is available to an employee if he is present in the overseas country for less than 183 days during a tax year and satisfies certain additional conditions.

Alternatively, the employee could claim a credit in India of the taxes withheld in the overseas country. However, there is a controversy under the Indian tax laws on whether an employer could consider the credit of the taxes withheld overseas while withholding taxes in India. Due to this, the employees may have to claim a refund of the excess taxes deducted in their return of income which could have a cash flow impact.

Timing of the international assignment matters

Planning of the timing of the international assignment would help in mitigating issues in respect of residential status. For eg if an Indian citizen leaves India for the purposes of employment outside India and has stayed in India for a period less than 182 days during the financial year, he may be classified as non-resident and would be taxed only on income received in India or deemed to accrue or arise in India. Accordingly, the income received outside India for services rendered outside India may be out of the purview of India taxes.

Apart from the above, there could be certain compliances to be undertaken in the overseas country, such as obtaining a tax registration number, filing personal tax returns, social security contributions, etc which needs to be considered. Additionally, certain countries have a concept of filing a family tax return, which also would need to be evaluated.

Another cost in the overseas country which could have a significant impact is the social security contribution. There are overseas countries which require people working over there to contribute to the statutory social security contributions.

However, India has entered into social security agreements with few countries whereby the employee can contribute in his home country and substantially reduce the social security contribution in the overseas country subject to obtaining an appropriate certificate from the Indian Provident Fund authorities. In case there is no social security agreement between India and the overseas country, there would be additional social security cost to be considered by the employer.

Working overseas may sound adventurous for many individuals, but relocating to a foreign place holds many tax challenges. So, before you pack your bags for that overseas assignment do your tax check-up.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Experience

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions