Withholding Tax

[Guest]

We are company in Hong Kong who recently provides intellectual property agency services for a Indian co. The invoice we sent incurred our service fee + agency fee which we need to pay to a agent in Taiwan + Offical fee of Trademark application to Taiwan governmnet. Now the Indian co. said they are required to retain 25% of withholding tax when they remit the money to us. As far as i know that HK has no DTA with India, however i am thinking if the cost we incurred (fee paid to Taiwan agent + offical fee to TW gov't) is tax deductible and can we reimburse the expenditure? And if we need to apply a PAN?

[Anuj Gupta]

Yes the expenses paid to Taiwan agent + offical fee to TW gov't, should not be chargeable to tax in India.

 

It shall be better if you apply for PAN although there will not be any reduction in TDS rates.

[Praveen Mittal]

Since you are a tax resident of Hong Kong and India does not have Double Taxation Avoidance Agreement [DTAA] with Hong Kong, hence it makes no difference whether you have Indian PAN or not

 

Secondly the charges for service provided by you would be covered under Fees for technical services under the provisions of Indian Income tax Laws on which tax needs to be withheld by the payer.  Rate of withholding tax in case of Fees for Technical services is 25 percent plus applicable surcharge and education cess at the rate of 3 percent . 

 

As regards official fee of Trademark application to Taiwan Government, in case if you provide the original supporting documents then this would be regarded as reimbursement of expenses and accordingly no tax is required to be withheld in such a case

 

hope this clarifies all your queries

 

AI Summary

Hong Kong IP services to Indian firm face 25% withholding tax due to no DTAA; reimbursed expenses exempt. A Hong Kong company providing intellectual property services to an Indian company raised a query about withholding tax. The Indian company intends to withhold 25% tax on payments due to the absence of a Double Taxation Avoidance Agreement (DTAA) between India and Hong Kong. Anuj Gupta advised that expenses paid to a Taiwan agent and official fees to the Taiwan government are not taxable in India, and applying for a PAN won't reduce TDS rates. Praveen Mittal confirmed the 25% withholding tax on technical services and noted that reimbursed expenses with original documents are not subject to withholding tax.