Withholding Tax

[Gopalarathnam Muralidharan]

Dear Sir

MD of private limited company in India holds 90 percent of the shares.   The same person holds more than 80 percent in a Dubai based company.   Now the Indian private limited co., wants to buy a plastic granules from a overseas supplier for which payments were made from Dubai.   Dubai company raises a debit note on the payment made on behalf of Indian co., Now the querry is

1) if the Indian company reimburses to the Dubai company on cost to cost basis without any element of profit,  whether any withholding tax requires to be deducted.    The company has not deducted tax on the ground, it involves purchase of goods and also no element of income is embedded.

2) If the Dubai based company charges Service charges, whether Indian co., while making payment to Dubai co., should deduct withholding tax on service charges alone

Pl clarify

Regards

G Muralidharan

AI Summary

No Withholding Tax Required for Indian Firm Reimbursing Dubai Affiliate or Paying for Services Abroad Under Tax Rules. An individual inquired about withholding tax obligations for an Indian private limited company involved in transactions with a Dubai-based company, both primarily owned by the same person. The query addressed whether withholding tax should be deducted when the Indian company reimburses the Dubai company for costs without profit, and if tax should be deducted on service charges. The response clarified that no withholding tax is required in either scenario: the first is a cost reimbursement without income, and the second involves services provided outside India, not subject to withholding under relevant tax sections.