RNOR status and business income from Italian company

Hi,

1. Income Reporting in ITR: As an RNOR (Resident but Not Ordinarily Resident) in India, you need to report your global income, but you may be able to claim relief under the Double Taxation Avoidance Agreement (DTAA) between India and Italy.

2. Tax in India: Since you are an RNOR, you are generally not taxed on foreign income unless it is received in India. However, if the Place of Effective Management (POEM) is considered to be in India, the income might be subject to Indian taxes.

3. POEM and Turnover Limit: The turnover limit of ₹50 crores is applicable to foreign companies for determining their residency status under POEM. Since your turnover is less than this, your company be considered non-resident in India.

4. Applicability of POEM/ABOI: POEM rules are generally applicable to companies, but not to sole proprietorships. However, if your business operations are effectively managed from India, Indian tax authorities might still consider your business income as taxable in India.

5. RNOR Status Benefits: As an RNOR, you can benefit from not being taxed on foreign income that is not received in India. However, if your business is controlled and managed from India, this may affect the taxability.

6. ABOI Applicability: The concept of Active Business Outside India (ABOI) can apply if you meet certain conditions, such as having substantial assets, employees, and business operations outside India. Given you have an employee and warehouses in Italy, you may qualify, but this needs careful evaluation.

7. Visiting Italy: Regular visits to Italy for business purposes can support the argument that effective management is not solely in India, but this needs to be consistent and well-documented.

Best regards,

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Thank you.

Shubham Goyal

- As you have mentioned that business structure is sole proprietorship therefore residential status of an Individual would be determined and considered for calculation of total income and tax liability. Assuming residential status calculated by you is correct i.e. RNOR. In case of RNOR status, Indian income and foreign business income controlled wholly or partly from India is taxable in India. The concept of POEM is applicable to determine residential status of a Company.

1. Yes

2. Yes. You can claim benefit of tax paid in Italy subject to the proportionate tax payable in India on such foreign business income. The concept of POEM is applicable to the company. 

3. Not applicable

4. Not applicable

5. Refer point no.1&2

6. Not applicable to RNOR residential status

7. NRI are liable to pay tax on Indian income only

For detailed discussion you may opt for phone consultation

1.  RNOR need not report global assets. But once you become ROR, it is mandatory to disclose the business interest in Italy along with the bank accounts and any other asset. 

    

2. The income from business if it is carried on from India and controlled from India, Shall be taxable in India
3. The POEM concept applies to a foreign company. In your case it is sole proprietary concern. So POEM shall not be applicable. In that case it would be assessed as your own income.
4. RNOR is for 2 years in which you cannot benefit if you Control the business from India.

For detailed consultation please choose telephonic consultation

Regards,