14 September 2015
Hello,
I am working in software company which is cost centre and my parent company is at US. My parent company has sold the software development services to an XYZ Indian company.
XYZ company wants the invoicing in INR and they also wants to remit the money to my parent company in INR.. now to avoid Forex loss , Can we collect the amount from. XYZ company and later adjust that through intercompany ledger in our books or can we send that amount to parent company when currency rates are suitable ??
what are the issues in this transaction ? whether it is allowed .??..please advise.
Thanks.
15 September 2015
Every business transaction is allowed unless prohibited by law. The transaction suggested by you is allowed as it is not prohibited by law. Indian Rupee is fully convertible on current account. Even the US based parent company can invoice in INR and receive payment in INR. That will be the simplest and best. Alternately you can invoice on behalf of Parent, pay Service Tax and collect the amount. Later you can remit the amount to parent company after deducting TDS. Further the transaction between your company and parent shall be subject to transfer pricing provisions of Income Tax law. We can make as many transaction as wish, but every transaction attract various provisions of law. I believe in doing things in the simplest manner, i.e. with least amount of transactions.
15 September 2015
Thanks Mr.Rajesh. If I will Invoice on behalf of my parent company that would be a domestic sale of services in my books and before making payment XYZ company would deduct the TDS. So when I remit this amount back to parent company I also neeed to deduct TDS and file Form 15 CA and CB so how to avoid this double TDS cut ?? My parent company will not agree to this ..Please advise.
15 September 2015
That is why I suggested that the parent company can invoice XYZ in Indian Rupees and receive payment. Subsidiary ha nothing to do with it. There is no tax liability on parent (either Service Tax or TDS). XYZ can pay Service Tax on reverse charge method, and take cenvat credit if allowed by law. When a simple transaction is done through two stages, tax liability arises at every stage.
15 September 2015
Ok, thanks for clarification. One last question related to this is whether XYZ company will withheld TDS from the amount payable to my parent company. If yes, can them use that TDS to make corporate tax payment at US under DTAA ??
When parent company will invoice in INR and receive the payment in INR do they carry exposure to currency fluctuations ?? They have USD account with Wells Fargo bank so any issue while conversion ??
15 September 2015
There is no issue with conversion of currency.. obviously some currency risk is there and currencies always fluctuate. XYZ company is not required to deduct any TDS as it is a payment for service. The income of your parent company is not being accrued or arise in India. Nevertheless Procedure prescribed vide Notification 67/2013 (Form 15CA/CB) is required to be followed.
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