1. One of our client is a production house(proprietary concern) ,involved in making advertisement for the companies approaching them for their products e.g. TV advertisement of Noodles.
2. In a recent assignment for advertisement, our client is shooting for an advertisement in Romania.
3. In Romania, our client will take help of cinematographer(technical word is DOP) from Germany, who will shoot the advertisement.
4. Our client will be billed by the the German DOP for the services of the cinematographer(they use the word- DOP).
5. Our client will Pay in euros for the services utilised.- 2000 Euros
6. The services by non resident will be rendered out of India. The person does not have any P.E. in India.
My Query:
1. whether, our client needs to Deduct the withholding tax on payment to non-resident U/s 195, as services are rendered out of India and the company does not have P.E. in India?
2. If yes, at what rate?
3. Any benefit as per article 12 of DTAA between India and Germany.
4. Any implication of Sec 115A, 9(1)(vii)?
your Advice on the issue will be highly appreciated.
12 May 2015
Dear Nihal Joshi, Sec 195 (1) - Scope - Deduction on the earlier of credit or payment of sum chargeable at the rates in force − Person includes non-resident having place of business or residence in India or not – Finance Act , 2012 • Exception: − Sec192 - Salary − Sec194LC - Interest on approved foreign currency loans obtained by an Indian company − Sec115-O - Dividend referred in Dividend Distribution Tax • Very wide – any sum, including reimbursements, chargeable under the Income Tax Act Any sum Chargeable to tax means • Amount paid which wholly bears the character of income • gross amount, the whole of which may or may not represent income or profits • Section 15 does not apply of the sums paid to non resident is exempt from tax [Hyderabad Industries Limited Kar (HC)] Relevant rate in force as per chapter XVIIB. Incase payee not having valid PAN, then TDS rate as per rate prescribed chapter XVIIB or 20% whichever is higher will apply. While calculating TDS rates we need to consider the provisions under Double Taxation Avoidance Agreement (DTAA) for the relevant country if any. In case payee fulfilling all the conditions as prescribed in the DTAA then rates as per DTAA will apply. Generally rates under DTAA will be lower than normal TDS rates.
CAclubindia
