Case Study

A Foreign company managing events for performing artists in India

A Foreign company was engaged in the business of managing events for foreign performing artists in India. All payments received were after deducting TDS (Withholding Tax) at rates which varied from party to party due to different DTAA between India and various countries.

As per current taxation laws, all sums payable to foreign company/ non-resident are liable to TDS being in the character of income chargeable to tax under sec 195 of Income Tax Act, 1961.

Moreover, services rendered by a performing artist amount to "Independent Personal Services" as referred to in the DTAA. Under the provisions of DTAA between the countries, income derived by an individual who is a resident of one of the Contracting States in respect of professional services or other independent activities of a similar character shall be taxable only in that State unless :(a) the individual has a fixed base regularly available to the individual or firm in the other Contracting State for the purpose of performing the individual's activities, in which case the income may be taxed in that other State but only so much of it as is attributable to activities exercised from that fixed base; or(b) the stay by the individual in the other Contracting State is for a period or periods amounting to or exceeding 183 days in a year of income, in which case only so much of the income as is derived from the activities of the individual in that other State may be taxed in that other State.

When the Netherlands based company approached Perfect Advice for guidance on TDS related matter, they were confused what rate should be used for TDS deduction. Some vendors deducted 10% and others 20% on gross amount. The exact picture was unclear to the company officials.

Team Perfect Advice suggested DTAA (Double Taxation Avoidance Agreements) benefits, Point of Taxation rules, gross amount concept, TDS rates ,other related regulations & their compliances, which the company now follows without being misguided by vendor parties.

As a consequence, the company officials highly appreciated Team Perfect Advice for their valuable suggestions.