1. Taxation of International Employment Arrangements
GOA RRC
06/08/2016
Taxation of International Employment Arrangements
BY CA SAGAR S TILAK

2. Background Globalization and Liberalization
Increase in Multinational Companies
FDI since 1991
Cross border movement of manpower

3. Expatriate Income Tax Act?? Ex-Patria Out of country
Latin
Ex-Patria
Out of country
Oxford
Person living abroad
Webster
Person residing in a foreign country
Income Tax Act??

4. Incidence of tax for expatriates
Residential status
Income accrued /deemed to be accrued in India
Income received/deemed to be received in India
Income accrued & received outside India
ROR
Taxable
NOR/NR
Non Taxable

5. Deemed to accrue or arise
Salary ‘deemed to accrue or arise’ in India if it is ‘earned in India’
Explanation to Section 9(1)(ii)- Services rendered in India
Actual execution of work vs. Time at Disposal
Term ‘Due’ vs. ‘Accrue’ [CIT vs. L.W.Russell (1964) 53 ITR 91 (SC)]

6. Services rendered in India vs. Services rendered from India:
Cases in favour:
Delhi HC: A Keilman [1979]
Delhi ITAT: ACIT Vs. Shri Ellis D Rozario [2009]
Delhi ITAT: DCIT Vs. Vivek Paul [1997]
Delhi ITAT: DCIT Vs. Mr.Eric Moroux

7. For clear classification maintain:
Contract to include split employment terms
Contract to indicate percentage of time required to be spent for India and other countries
Record for services rendered for respective country

8. Social security contributions in home country
Social Security contributions in home country are deductible in India.
Relevant case laws:
[CIT vs. L.W.Russel (SC) (1964) 53 ITR 91]
[ITO vs. Lukas Fole (2009) 124 TTJ 965 (Pune ITAT)]
[Gallotti Raoul vs. ACIT (Mumbai ITAT) 1997]

9. Employment arrangements
Secondment
Deputation

10. CASE LAWS

11. Important rulings TEKMARK GLOBAL SOLUTIONS LLC
[TS-5164-ITAT-2010(Mumbai)-O]
MORGAN STANLEY & CO INC
[TS-5020-SC-2007-O]
CENTRICA INDIA OFFSHORE PVT.LTD
[TS-237-HC-2014(DEL)-O]
JC BAMFORD EXCAVATORS LTD
[TS-161-ITAT-2014(DEL)-O]
ELI LILLY & COMPANY (INDIA) (P) LTD
[TS-124-SC-2009-O]

12. CENTRICA INDIA OFFSHORE PRIVATE LIMITED
Centrica STRUCTURE
CENTRICA PLC UK
Customer Canada
Employees on Secondment
Customer UK
Cost plus 15%
Back office work
CENTRICA INDIA OFFSHORE PRIVATE LIMITED
INDIA
Supervision & quality control
Vendor 1
Vendor 2

13. Facts of centrica ruling
Control & supervision
Responsibility for errors & omissions
Separate agreements with secondees
Employees will be paid in home country
Employees to remain on payroll of Centrica PLC
CIOP will reimburse salary to PLC
CIOP deducted tax at source u/s 192

14. Delhi hc observations- Centrica
Payment of salary is an obligation of Centrica UK, being the legal employer.
Salary charged by CIO to PLC is not just reimbursement
Secondees performed tasks for the home employer
No economic employment
Secondees provided technical services

15. Service PE because.... Secondees retained home employment
Availed Social security benefits
CIO can terminate secondment but not employment
Employees can not sue CIO for non payment of salary
Contract for service

16. 8 Deputees & other Secondees
JCB India
Royalty
JCB UK
IPAA
TTA
8 Deputees & other Secondees
JCB India

17. Ruling highlights Two categories of employees
No separate consideration for Category 1 employees
No agreements between Host entity & Secondees
Visiting cards of JCB India can not justify employment
Sending employees was part of TTA and hence, IPAA can not be read in isolation
Sending employees was at the discretion of JCB
Deputed employees constitutes PE & not JCB India

18. Tds obligations Legal Employer? Section 9(1)(ii) Section 192
‘Estimated Income’ u/s 192(1)
Services rendered for?

19. Questions ?

20. Thank you!