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Withholding tax for service imports from US and China

Sumit Agrawal (Director) (32 Points)

12 November 2021

Does an LLP firm need to deduct withholding tax in India for payments to entities in USA and China that does not have an establishment in India for import of services? If yes, at what rate? Does that apply if the import of services is from independent contractors?

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2 Replies

CA Raj Doshi (Practising CA) (8903 Points)
Replied 14 November 2021

An Import of Service would require classification into royalty or fts as per income tax act. accordingly, tds u/s 195 will definitely come into play.

Then the country specific DTAA needs to be studied provided the vendor provides a TRC, Form 10F.

Post this study, the Beneficial tax rate can be applied and form 15CA CB shall be filed for remittance.

if you don't intend to refer to DTAA, then straight away do a correct classification based on the income tax act, apply the rate, check your agreement for grossing up and close.

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Sumit Agrawal (Director) (32 Points)
Replied 17 April 2022

The services taken from the foreign entities involve recruitment/identification of relevant persons who can be located anywhere in the world and scheduling phone interviews/discussions in between those candidates and me to discuss a project topic for 30-60 minutes. We need this discussion as part of primary research to gather info in order to deliver our research/consulting projects. I'm dealing with two USA entities both of who say they deal with multiple clients in India who do not need to deduct any tax and that they will not be able to use any such deduction as their input credit when they file their return at the end of the year.