International Tax Advisory
International Tax Advisory comprises of applicability of Income Tax Act along-with provisions of Double Taxation Avoidance Agreements (DTAA). International Tax Advisory also considers tax relief on tax paid in foreign country.
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Considering the globalization of market, every industry in order to keep a pace has to make its presence in multiple countries. By enabling the presence in multiple countries the companies play on economies of scale by choosing to set-up Research and Development activities in countries having developed in modern machineries, set-up of Manufacturing facilities in countries offering cheap labour, set-up of marketing and merchandising activities in countries having easily accessible from world markets. By enabling the global presence the credibility and the market size of the company also increases. Most of the companies having global presence need to incorporate the holding – and subsidiary company relationship with the head quarter and companies located at various locations. Another way is to set-up of branch business of parent entity at various locations globally.
The main concern of companies while set-up at various locations globally is to drive maximum gain by minimising tax cost, operating cost and other indirect cost and keep the entire operations economically feasible and working efficiently. Multinational Companies across the world are investing more and more in India and as they go about establishing themselves, it is very crucial for them to understand India’s tax structures and regulatory policies. Apart from understanding Income Tax provisions various other Double Taxation Avoidance Agreement (DTAA) provision need to be adhered to. In addition to an already existing complex and uncertain tax environment in India and globally, MNCs need to scale up their infrastructure in order to ensure compliance of the new and ever-changing tax and regulatory framework.
Following factors need to be considered from international tax advisory point of view:
- FDI (Foreign Direct Investment) norms and its limit for investment in specified sector, also need to comply with FDI norms country wise considering its automatic route or approval route
- Cash / Profit Repatriation tax as per country wise need to be analysed and the same to be designed in such a manner to carry out effective tax planning country wise
- Financing techniques should be tax effective and thin capitalisation rules
- Understanding and deriving maximum benefit from the tax treaties existed between the countries, instead of adopting normal tax structure tax treaties can become beneficial.
- Understanding various exemptions and subsidies given by different countries, mapping the same with the country wise location of the business and to drive maximum benefit from exemptions / relief measures / capital subsidy etc.
- Tax rulings must also be interpreted and the same may also be taken into consideration if the tax laws are not clear or silent on specific issues.
- Companies having global presence must develop tax efficient structure aimed at mitigating tax leakage
- Ascertain the applicability and mitigation of withholding taxes on cross border payments such as interest, royalties, dividends or branch payments.
- Evaluating the foreign tax credit and mapping it with tax treaties if applicable, allocation of expense principles, permanent establishment and Tax Residency certificates (TRCs)
- Cross Border Treasury and finance must me tax efficient and besides that there must be ease in repatriation of profits.
- Analyse and evaluate the Intellectual Property Rights (IP Rights) and designing & structuring the IP transfer in tax efficient manner.