Deducting Withholding Tax For Foreign Supplier Payments?

[Guest]

Hi All, I have a major headache and would really appreciate some expert advice from any of you!

Please allow me to give you small background: My company is a digital marketing agency - we have company entities in Hong Kong, Thailand, Singapore and India. From our Indian entity we are providing services for Indian hotels.

Now... to provide international customers for our Indian hotels we need to utilize international websites, which don't have a PE in India or PAN.

The problem: Our Chartered Accountant firm tell us that we must deduct withholding tax when paying their invoices. However, the supplier would not be able to claim that WHT back as they have no Indian company - so clearly this is not acceptable to our supplier to only receive 90% of their dues!

Does anybody have a solution to this? It seems like we can't work with international suppliers for our Indian business!

Thanks so much for anyone kind enough to help :)

Michael

[Ganeshan Kalyani]

Sir, one cannot escape tax if deductible. If Pan is available then regular rate of tax is applicable if not then 20% is deductible. For further possibility please check the DTAA - Double Taxation Avoidance Agreement. Thanks.

[Guest]

Dear Ganeshan,

Thanks so much for your reply, even if it is bad news for me! I guess we can't really work with international suppliers feasibly.

Thank you once again!
Michael

[Ganeshan Kalyani]

Please check out the sentence of my reply. Id there is any agreement between countries for double taxation avoidance then transaction with that country will not attract tax. Thanks.

[DR.MARIAPPAN GOVINDARAJAN]

It is the logic when the revenue accures in India TDS is liable to be made. Your case is a complex one and it is prevailing for all like you. To get a clear picture you may refer to Shri Rajarathinam, Advocate (Ex.Tribunal Member), who is an expert in Income Tax field.

AI Summary

Digital Marketing Agency Faces Tax Challenges with International Suppliers Due to Withholding Tax and Lack of PAN A digital marketing agency with entities in Hong Kong, Thailand, Singapore, and India faces a tax dilemma when paying international suppliers without a Permanent Establishment (PE) or PAN in India. Their Chartered Accountant advises deducting withholding tax (WHT) from supplier payments, which suppliers cannot reclaim, leading to dissatisfaction. A respondent suggests checking the Double Taxation Avoidance Agreement (DTAA) for potential relief. Another advises consulting a tax expert for clarity, acknowledging the complexity of the situation. The agency struggles to work feasibly with international suppliers due to these tax complications.