INDIA-Tax Update for Foreign Companies

The Supreme Court of India has ruled that a foreign company with employees working in India had a “permanent establishment” in that country due to the fact that the employees working in India remained employees of the foreign country entity. As a result, business profits of the foreign company would become taxable in India.

There were several factors that the Supreme Court relied on including the following:  whether the employees remain on the foreign company payroll, whether they have a right to return to a job in the foreign country, and whether the foreign company has responsibility for their work.

As a result, companies with employees working in India may face unexpected tax and compliance burdens.