Deducting Withholding Tax For Foreign Supplier Payments?

[Asked by 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

AI Summary

Withholding tax obligation can require deduction on payments to foreign suppliers lacking PAN or PE, subject to DTAA.
Payments from an Indian entity to foreign suppliers for services used in India can require deduction of tax at source where revenue is treated as accruing in India; lack of an Indian PAN often leads advisers to apply a higher withholding rate. Examination of any Double Taxation Avoidance Agreement between jurisdictions may alter withholding obligations or rates and inform whether treaty relief or exemptions apply.