Dear Sir, Please note i am an Indian resident. I am working as a textile export agent and my job is to fix the deal between buyer and seller and i get my commission (1-2% of deal value in USD) from it. So far i am taking this commission in my Indian account. However since the tax rates in India is very high so i want to open an overseas company to save some taxes and file tax there. my question is as below- 1) Is it better to open account in that country which have double taxation avoidance agreement with India? So that we can pay tax in that country and no need to pay here? 2) If we pay tax in that country, then as per DTAA, how indian govt will treat me for tax payable on foreign income? Because i will deposit tax on profit only in that country. So indian govt will trust me on that amount or they will ask me to pay more taxes. So how it will work? will they believe auditors of that country? What amount i need to declare to indian govt? Profit amount or Tax paid in that country or Total Revenue? 3) Or i shall choose country which dont Have DTAA with India? Please give me which country will be best to open account so that i can save maximum taxes but with legal procedure.
Hi
In case you are forming a separate entity outside India and it is established that the place of effective management of that entity is outside India, tax shall only be payable in that country and not in India.
When you will receive any amount of money from the foreign entity in India by way of salary or otherwise, the same shall be taxable in India.
We may discuss the issues in detail over a phone consultation.
- It needs comparative study among countries to take informed decision. In india , corporate tax rate is reduced to 22%. POEM is not applicable if the turnover is less than 50CR. You should go for countries which are having DTAA with India.
Dear Sir,
Hope you are doing well !!
It is better to choose countries which are having DTAA with India. It would be more beneficial.
However, the provisions relating to place of effective management (POEM) will apply to companies with over Rs.50 crore turnover.
It is advisable to take a phone consultation for detailed discussion.
Hi
As per my understanding it is better you should go for countries which has DTAA with india.
it requires a detail discussion please have a phone consultation.
Hello,
It would be better to go for countries having DTAA with India. If you form an entity outside India and the POEM rules are not applicable, the income of such entity shall be taxable in that country only. However, while drawing a salary or other income from the entity, it would be taxable in India depending on your residential status.
I hope this answer satisfies your requirements.
Regards,
CA Hunny Badlani
If your company is being managed by you sitting in India then how would you prove that company is operating from outside India.
The PE would be deemed to be in India.
If you have employees working outside India in that case you might save some tax.
There are various issues involved like: type of country, involvement of you in that country and other such things.
Even if there is no DTAA with that country then also if you are handling all business, government can charge tax on such income.
Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.
Thank you.
Hello,
There are multiple aspects to it
a) You can also open account in India in FTZ / EOU / Gift City to save on tax front
b) If you are keen to go with the intereational company better to opt for the offshore company with minimal or nil tax. However Annual cost of running and maintaining company will be high
We can help you with total set up along with the best suitable options across globe from taxation point of view to have zero tax payment in that country
recap: We are working as brokers and engaged as commission agents. We facilitate goods export between one country to another country and get paid in USD. Our annual turnover is much less than 50cr. So we have following questions. 1) Can we set up an offshore company in tax free zones like Hongkong, Singapore, Dubai etc? And receive our commission income there? 2) We will travel outside india for self employment (As director of this new company) on business visa on regular basis (to meet clients) so if we stay in India less than 182 days in that year so can we call ourself NRI? We will keep our indian income less than 15 lakhs in a year. 3) If we become NRI as per above condition, then shall we declare above company name in our ITR while filing our return as NRI? 4) And If we become NRI as per above condition, then can we transfer funds from this overseas company to our Indian NRE account tax free? And if I am planning for becoming NRI for next FY then when can i open NRE account and when can i transfer funds from overseas company to NRE account? Shall i want for 182 days finish and then open NRE account and transfer funds? 5) As Hk, Singapore, Dubai do not have any taxes, so my overseas company will not get TRC(tax residency certificate) and i will also not get TRC. So is it possible that neither i am paying taxes in overseas and nor i am paying taxes in India (being NRI for India)?? So far i know NRI need to enter TRC number while filing ITR so how i will get TRC if i do not pay taxes in Dubai (for example). 6) So far i know, every Individual should be a tax resident in any of the country so where can i become tax resident? because countries like Dubai, HK etc do not levy tax on commission income so i wont be paying tax there also and in India also (being NRI), so how to do?
1) Yes
2) Less than 60 days in a financial year
3) Yes both as director and shareholder
4) On change of residential status
5) Taxpayer identification no. or Passport no. is required
6) Nothing to do. DTAA concept arises when single income is taxed twice (only in case of person having "Resident" residential status)
For detailed and further discussion you may opt for phone consultation