Payment to us company
This query is : Resolved
26 July 2016
Hi Experts,
i am working in a MNC. we are using Oracle USA cloud based services. we need to pay $400 as annual subscription fees to use the said services. while making the payment do i need to deduct TDS? what is the taxability of this particular transaction as per Indo US DTAA?
and my second query is we want to make the payment through NEFT in USD. i think we have to file Form 15CA & 15CB to make the payment. please correct me if i am wrong. Thanks.
i am working in a MNC. we are using Oracle USA cloud based services. we need to pay $400 as annual subscription fees to use the said services. while making the payment do i need to deduct TDS? what is the taxability of this particular transaction as per Indo US DTAA?
and my second query is we want to make the payment through NEFT in USD. i think we have to file Form 15CA & 15CB to make the payment. please correct me if i am wrong. Thanks.
28 July 2016
hi someone please reply to my query
09 August 2024
### Payment to a U.S. Company for Oracle Cloud-Based Services
#### **1. TDS Deduction on Payment to U.S. Company:**
**Taxability under Indo-U.S. DTAA:**
1. **Nature of Payment:**
- **Oracle Cloud-Based Services:** The payment for cloud-based services generally falls under the category of "Fees for Technical Services" (FTS) or "Royalty" as per the Indian tax laws and the Indo-U.S. Double Taxation Avoidance Agreement (DTAA).
2. **DTAA Provisions:**
- Under the Indo-U.S. DTAA, the payments made to a U.S. company for services may be classified as either Royalty or Fees for Technical Services.
- **Article 12 (Royalties) and Article 13 (Fees for Technical Services)** of the Indo-U.S. DTAA outlines the tax treatment for such payments. Generally, the tax rate on such payments is 40% in India if the payment is classified as royalty or technical services fees. However, the actual applicability may vary based on the nature of services and the specific provisions in the DTAA.
3. **TDS Requirement:**
- **TDS Deduction:** Since the payment to Oracle USA falls under technical services or royalty, you are required to deduct TDS as per Indian tax laws.
- **Rate of TDS:** The TDS rate applicable under the DTAA must be applied, and in the absence of a specific provision, the standard rate of 40% (plus applicable surcharge and cess) will apply.
#### **2. Filing Form 15CA and 15CB:**
**Requirements for Foreign Payments:**
1. **Form 15CA and 15CB:**
- **Form 15CA:** This is a declaration form required to be filed by the remitter for payments made to non-residents. It is used to report the details of foreign remittance and the nature of the payment.
- **Form 15CB:** This is a certificate issued by a Chartered Accountant, certifying that the tax has been deducted as per the Indian tax laws and that the payment is in accordance with the provisions of the DTAA.
2. **NEFT Payment:**
- When making payments in USD to a foreign entity via NEFT or any other method, you are required to file both **Form 15CA and 15CB**. This is to ensure compliance with tax regulations and to verify that the appropriate TDS has been deducted.
3. **Procedure:**
- **Obtain Form 15CB:** Get a certificate from a Chartered Accountant confirming the correct deduction of TDS and the nature of the payment.
- **Submit Form 15CA:** Fill and submit Form 15CA online on the Income Tax e-filing portal, providing the details of the foreign remittance.
- **Make the Payment:** Proceed with the payment through NEFT or other banking channels, ensuring that the payment is made in compliance with the tax regulations.
### **Summary:**
1. **TDS Deduction:** Yes, TDS needs to be deducted on the payment of $400 to Oracle USA for cloud-based services, considering the payment falls under FTS or Royalty.
- **Applicable Rate:** Generally, 40% TDS plus applicable surcharge and cess unless a lower rate is specified under the DTAA.
2. **Form 15CA and 15CB:** Yes, you need to file Form 15CA and obtain Form 15CB to comply with the regulatory requirements for making payments to a foreign entity.
Ensure you consult with a Chartered Accountant or tax advisor for precise calculations and to handle the filing of forms correctly.
#### **1. TDS Deduction on Payment to U.S. Company:**
**Taxability under Indo-U.S. DTAA:**
1. **Nature of Payment:**
- **Oracle Cloud-Based Services:** The payment for cloud-based services generally falls under the category of "Fees for Technical Services" (FTS) or "Royalty" as per the Indian tax laws and the Indo-U.S. Double Taxation Avoidance Agreement (DTAA).
2. **DTAA Provisions:**
- Under the Indo-U.S. DTAA, the payments made to a U.S. company for services may be classified as either Royalty or Fees for Technical Services.
- **Article 12 (Royalties) and Article 13 (Fees for Technical Services)** of the Indo-U.S. DTAA outlines the tax treatment for such payments. Generally, the tax rate on such payments is 40% in India if the payment is classified as royalty or technical services fees. However, the actual applicability may vary based on the nature of services and the specific provisions in the DTAA.
3. **TDS Requirement:**
- **TDS Deduction:** Since the payment to Oracle USA falls under technical services or royalty, you are required to deduct TDS as per Indian tax laws.
- **Rate of TDS:** The TDS rate applicable under the DTAA must be applied, and in the absence of a specific provision, the standard rate of 40% (plus applicable surcharge and cess) will apply.
#### **2. Filing Form 15CA and 15CB:**
**Requirements for Foreign Payments:**
1. **Form 15CA and 15CB:**
- **Form 15CA:** This is a declaration form required to be filed by the remitter for payments made to non-residents. It is used to report the details of foreign remittance and the nature of the payment.
- **Form 15CB:** This is a certificate issued by a Chartered Accountant, certifying that the tax has been deducted as per the Indian tax laws and that the payment is in accordance with the provisions of the DTAA.
2. **NEFT Payment:**
- When making payments in USD to a foreign entity via NEFT or any other method, you are required to file both **Form 15CA and 15CB**. This is to ensure compliance with tax regulations and to verify that the appropriate TDS has been deducted.
3. **Procedure:**
- **Obtain Form 15CB:** Get a certificate from a Chartered Accountant confirming the correct deduction of TDS and the nature of the payment.
- **Submit Form 15CA:** Fill and submit Form 15CA online on the Income Tax e-filing portal, providing the details of the foreign remittance.
- **Make the Payment:** Proceed with the payment through NEFT or other banking channels, ensuring that the payment is made in compliance with the tax regulations.
### **Summary:**
1. **TDS Deduction:** Yes, TDS needs to be deducted on the payment of $400 to Oracle USA for cloud-based services, considering the payment falls under FTS or Royalty.
- **Applicable Rate:** Generally, 40% TDS plus applicable surcharge and cess unless a lower rate is specified under the DTAA.
2. **Form 15CA and 15CB:** Yes, you need to file Form 15CA and obtain Form 15CB to comply with the regulatory requirements for making payments to a foreign entity.
Ensure you consult with a Chartered Accountant or tax advisor for precise calculations and to handle the filing of forms correctly.
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