rocket
Introducing the Orbitax International Tax Platform, a revolutionary suite of integrated tax solutions including research, compliance, calculations, entity management and charting. Find out more.
News Share

The Tax Hub

Daily Tax Newsletter

India-Japan

Responsive image

India Court Holds Liaison Office does not Constitute PE under Tax Treaty with Japan

The Delhi High Court recently issued a decision on whether or not a liaison office (LO) in India may constitute a permanent establishment under the 1989 India-Japan tax treaty. The case involved Japan-based Mitsui & Co. Ltd., which had engaged in two power projects in India. In addition, Mitsui maintained an LO in India as permitted by the Reserve Bank of India (RBI) to carry on liaison activities only, which included identifying new purchasers and sellers of goods and merchandise, and reporting information to the head office.

In its returns for the years concerned, Mitsui claimed nil income in respect of the LO because it considered that it met the conditions set by the RBI, which included that the LO does not carry on any trading, commercial, or industrial activity. However, in reviewing the returns, the assessing officer determined that the LO constituted a permanent establishment because the LO and the separate project offices shared a common chief representative and certain telephone expenses of one of the power projects had been allocated to the LO. Based on this, a tax adjustment was issued, which Mitsui appealed, with the case eventually making its way to the High Court.

In its decision, the High Court found in favor of Mitsui. In order for the LO to be treated as a permanent establishment, the Court held that the tax authority must prove that it met the conditions for a permanent establishment as set out in Article 5(1) and 5(2) of the India-Japan tax treaty. In particular, it must be shown that the LO was a fixed place of business through which the business of Mitsui was wholly or partly carried out. Because the LO was clearly not used for the purpose of business in the years concerned and the conditions set by the RBI were met, it could not be considered a taxable permanent establishment. With respect to the shared chief representative and the allocation of telephone expenses, the Court found it was not sufficient to conclude that the LO was carrying on the business of the enterprise.

Powerful Tax Tools

NEW

FX Rates

Global FX Rates including Tax Year Average FX Rates and Spot Rates for all Reporting Currencies.

NEW

Corporate Tax Rates

Corporate tax rates, surtaxes, and effective tax rates for the current year, as well as historical rates and approved future rates.

NEW

Country Analysis

Detailed tax guidance for companies doing business in over 100 countries, including summaries and snapshots of key tax facts and issues.

NEW

Cross Border Tax Calculator

Calculate total tax costs and benefits of a cross border transaction including withholding tax, participation exemption and foreign tax credit rules.

NEW

Cross Border Tax Rates

Provides Domestic, treaty and EU cross border tax rates for over 5,000 country combinations for 9 different payment streams.

NEW

OECD BEPS Project

Complete overview of the OECD BEPS Project, including daily BEPS news, country adoption of BEPS measures, and an overview of the 15 BEPS Actions.

NEW

Tax Calendar

Customizable calendar tool that tracks corporate income tax, value added tax and transfer pricing obligations by country or entity.

NEW

Tax Forms

English translations of key tax forms for over 80 countries, including tax return forms, treaty benefit forms, withholding tax forms, and more.

NEW

Worldwide Tax Treaties

Repository including thousands of tax treaties (in English), OECD, UN and US Models, relevant EU Directives, Technical Explanations, and more.

NEW

Worldwide Tax Planner

Calculates the worldwide tax cost of what-if scenarios based on legal entity structure, taxable income, and cross border transactions.

NEW

Certified Rates Report

Customizable Certified Rates Report providing updated corporate and withholding tax rates at the end of each month for over 100 countries.

NEW

Withholding Tax Minimizer

Enables quick calculation of tax costs and benefits of cross border transactions considering all possible transaction combinations and optimal routes.

NEW

VAT Rates

Provides value added tax (VAT) rates, goods and services tax (GST) rates and other indirect tax rates for over 100 countries.

NEW

NOL Calculator

Country specific calculator to determine how net operating losses can be utilized in carryback and carryforward years.

NEW

Transfer Pricing Calculator

Calculates TP ratios under various TP methods and calculates the difference between target ratios and actual ratios.

NEW

Individual Income Tax Rates

Individual tax rates for over 100 countries.

Play of the Day

Worldwide Tax Treaties

Repository including thousands of tax treaties (in English), OECD, UN and US Models, relevant EU Directives, Technical Explanations, and more.

We’re here to help

We’re here to answer any questions you have about the Orbitax products and services.

Send us a message

Who’s behind Orbitax?

We’re committed to providing high value, low cost tax research and management solutions.

Learn More