PE Risk in India: How Foreign Companies Can Safeguard Against Unintended Tax Liabilities

 

PE Risk in India: How Foreign Companies Can Safeguard Against Unintended Tax Liabilities

Permanent Establishment (PE) is a critical concept in International Taxation, as it determines whether a foreign entity’s business activities in India trigger tax liabilities. Given the growing global business footprint and India’s complex tax landscape, foreign companies must remain vigilant to avoid unintended tax exposure. In this article, we explore how foreign companies can safeguard against PE risk in India and mitigate potential tax liabilities. 

Case Study: Foreign Consulting Firm’s PE Risk in India

Consider a foreign consulting firm that sends employees to India for a short-term project, but those employees interact with clients, perform services, and supervise work in India. If this activity continues for a substantial period or involves establishing an office space in India, the consulting firm could inadvertently create a PE and be taxed on the income generated from these activities.

Check the full blog insights here- https://uja.in/blog/taxation-times/permanent-establishment-risk-in-india-tax-liability-solutions/

To avoid this risk, the consulting firm should ensure that its Indian operations are temporary, with no permanent office established, and its employees’ activities do not extend beyond advisory and non-transactional work.

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