CTC Seminar on secondment and expatriates Expatriate case studies by Vikas Garg Head of Services & L&D Broadening Horizons Services Private Limited India partner of Global Tax Network

Case Study 1 – Standard expatriate arrangement

Case Study 1 – Facts Employee of foreign company sent to India on a 2 year assignment to Indian subsidiary Employee continues to be paid in Home country with no salary cross charge to India Employee is a foreign national with no past travel history to India Start date of assignment - November 1, 2015 CTC Seminar – Expatriate case studies Page 3

Case Study 1 – Queries Which visa is required for entry to India What is the employee’s taxability in India What are the employer’s obligation in India Who is the employer and what are the key risks CTC Seminar – Expatriate case studies Page 4

Visa requirement Employment visa Would the Visa type change if the assignment was only 6 months – Exercise of employment vs work performed CTC Seminar – Expatriate case studies Page 5

Taxability in India – Non resident – India sourced income liable to tax – May be eligible to treaty exemption and – Not Ordinarily Resident – India sourced income liable to tax CTC Seminar – Expatriate case studies Page 6

Employer’s obligations Undertake TDS obligations for years of taxability – Deduct TDS for the relevant years of taxability – Report in relevant year’s salary return – Issue year-end TDS certificates Contribute social security unless below de-minimis employee strength or there is a COC available CTC Seminar – Expatriate case studies Page 7

Employer and key risks The foreign entity is the employer Key risks in India are: – establishment of PE in India and corresponding corporate tax reporting obligations in India – Corporate exchange control implications CTC Seminar – Expatriate case studies Page 8

Case Study 1 – Solution Employment visa Taxability in India – NR (may be eligible to treaty exemption) – and NOR (no treaty exemption available) Employer’s obligations – Deduct TDS for the relevant years of taxability, report in relevant year’s salary return and issue year-end TDS certificates – Contribute social security, unless de-minimis strength or COC available The Foreign entity is the employer Key risks are establishment of PE in India and corresponding corporate reporting obligations in India CTC Seminar – Expatriate case studies Page 9

Case Study 2 – Variant expatriate arrangement

Case Study 2 – Facts Employee of US company sent to India on a 2 year assignment to Indian subsidiary Employee continues to be paid in Home country with salary cross charge to India Employee is a US national but a PIO with substantial past travel history to India (was on a 3 year assignment to India from 2007 to 2009) Start date of assignment – November 1, 2015 CTC Seminar – Expatriate case studies Page 11

Case Study 2 – Queries Which visa is required for entry to India What is the employee’s taxability in India What will be the tax position if the employee has capital gains from Indian and US stock What are the employer’s obligation in India Who is the employer and what are the risks Any specific reporting obligations for the employee in India CTC Seminar – Expatriate case studies Page 12

Visa requirement Employment Visa No visa required if OCI card obtained CTC Seminar – Expatriate case studies Page 13

Taxability in India – Resident – Global income liable to tax – Is treaty benefit available? and – Not Ordinarily Resident – India sourced income liable to tax For , gains will be doubly taxed for US stock sales – Is tax credit available? CTC Seminar – Expatriate case studies Page 14

Employer’s obligations Undertake TDS obligations for years of taxability – Deduct TDS for the relevant years of taxability – Report in relevant year’s salary return – Issue year-end TDS certificate Contribute social security unless below de-minimis employee strength CTC Seminar – Expatriate case studies Page 15

Employer and key risks The Indian entity can be treated as the employer Documentation required CTC Seminar – Expatriate case studies Page 16

Special reporting obligations For , foreign assets and income reporting obligationforeign assets and income reporting obligation CTC Seminar – Expatriate case studies Page 17

Case Study 2 – Solution No visa required if OCI card obtained. Else, employment visa Taxability in India – ROR – and NOR For , gains will be doubly taxed for US stock sales Employer’s obligations – Deduct TDS for the relevant years of taxability and report in relevant year’s salary return – Contribute social security, unless de-minimis strength The Indian entity can be treated as the employer For , foreign assets and income reporting obligation CTC Seminar – Expatriate case studies Page 18

Case Study 3 – Outbound transferee

Case Study 3 – Facts Employee of Indian company transferred to US Date of transfer - November 1, 2015 Employee’s first visit outside India CTC Seminar – Expatriate case studies Page 20

Case Study 3 – Queries What is the employee’s taxability in India in the year of repatriation What will be the tax position if the employee has capital gains from Indian and US stock Any specific reporting obligations in India What are the employer’s obligation in India CTC Seminar – Expatriate case studies Page 21

India taxability and reporting Resident – As per IT Act, liable to tax on global income – As per India-US tax treaty, possibility of claiming the following benefits: Tax credit Tax exemption - Split residency – Capital gains fully liable to tax in India - tax credit only available for India tie-break period – Foreign assets and income reporting obligation CTC Seminar – Expatriate case studies Page 22

Employer’s obligations – For India employment period - normal as per law – For US employment period - none CTC Seminar – Expatriate case studies Page 23

Case Study 3 – Solution Taxability in India – ROR – As per IT Act, liable to tax on global income – As per India-US tax treaty, possibility of claiming the following benefits: Tax credit Tax exemption - Split residency Capital gains fully liable to tax in India - tax credit only available for India tie-break period Foreign assets and income reporting obligation Employer’s obligations – For India employment period - normal as per law – For US employment period - none CTC Seminar – Expatriate case studies Page 24

Questions

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