Reimbursement of expenses..

[Reshma kochar]

Dear Experts,

Our Co. is one of the subsidiary of a foreign Co...Which pays comman insurances, internet usages say leased lines or licence procurements for its all subsidiaries.. My question is - Will  withholding or service tax liability comes on us or not? 

[CA Rachit Agarwal]

Witholding Tax

If the holding company is earning the income from such services, then the witholding tax will be attracted. As per the provision of Section 195, TDS will be deducted on the income which is chargeable to income tax in India.

Service Tax

Service Tax is applicable on rendering of services. As the same is only re-imbursment and holding company is not rendering the services hence the same would not be applicable. Further the payments made on account of re-imbursement could not be considered as the import services as the same is not be rendered outside India and received in India.

[DEV KUMAR KOTHARI]

In absence of full facts it would be risky to reply  on such intricate matters. a reply can  be incomplete and misleading hence not fully reliable. We have to consider all facts, circumstances and related provisions together. 

[Reshma kochar]

Thanks....

AI Summary

Withholding tax may apply where a foreign parent earns income from services, while service tax typically not on mere reimbursements. If the foreign parent earns income from services to Indian subsidiaries, withholding tax/TDS obligations can arise on payments chargeable to tax in India. By contrast, payments characterised as mere reimbursements where the parent does not render services are generally not subject to service tax and are not treated as import of services. A careful fact-specific analysis is required to determine characterisation and tax consequences.