Maier+Vidorno

Risks of a Permanent Establishment in India and how can you avoid them

Client Speak
LI Ping HR Director / BHS Corrugated Machinery(Shanghai) Co.Ltd

Strong support in recruitment
M+V is very professional in India HR market. They were able to provide us with strong support in our recruitment. We are satisfied with their service.

Falk Tzchichholz Sales Manager Export / Kjellberg Vertrieb GmbH

Incubation solution
With the incubation solution from Maier + Vidorno , we successfully placed our products in the Indian market and established valuable product market presence, which we can now build on further with our subsidiary

Andreas Dauerbock Quality Assurance / Voestalpine Grobblech GmbH

BIS registration project
The BIS registration project went smooth and efficient. We are very satisfied with the way the documentation, communication and inspection on-site was handled from the Maier+ Vidorno Team. We are happy to recommend working with M+V in India – with the expert’s advice you will need.

Rajesh Nath Managing Director / VDMA India Services Pvt Ltd German Engineering Association

Competent Partner
India has great investment potential for foreign companies if you manage the highly complex business environment professionally. Our experience shows – Maier+Vidorno is a competent partner to efficiently set up and run business.

Bjoern Becker Export Sales / Jumo GmbH & Co KG

Market Presence and Profitability
The cooperation of JUMO and Maier+Vidorno is a success story in India since 2008. Our sales, market presence and profitability in India shows constant growth. M+V knows about the challenges foreign companies face while doing business in India – and provides hands-on solutions.

Rene Pluss CFO, Member of the Board / Regent Beleuchtungskorper AG

Business Diagnostic and Implement Improvement
Maier+Vidorno understands business challenges in the Indian business environment and provides solutions with the help of its experts. M+V has experience in running business diagnostics and implement improvement and expansion strategies in various industries in India.

    Risks of a Permanent Establishment in India and how can you avoid them-M+V Altios

    What are the risks of a Permanent Establishment (PE) in India and how can you avoid them?

    According to Article 5 of Double Taxation Avoidance Agreement (DTAA) and the concepts underpinning Permanent Establishment in India, any profits of an enterprise of one Contracting State are taxable in the other state, only if the enterprise maintains a Permanent Establishment in the second country, and only for profits are attributable to that Permanent Establishment. Thus, a Permanent Establishment is the legal compromise between your source country and resident country for the purposes of taxation of business profits. There are six categories of Permanent Establishment:

    • Place of Management Permanent Establishment
    • Fixed place Permanent Establishment (branch, office, factory, workshop, warehouse, sales outlet, website, etc.)
    • Construction Permanent Establishment (building site or construction)
    • Installation or assembly project Permanent Establishment (criteria duration of each installation project)
    • Service Permanent Establishment
    • Dependent Agency Permanent Establishment, i.e., the enterprise does not have any economic or functional independence

    In a landmark decision i.e. CIT Vs. Vishakhapatnam Port Trust [(1983), 144-ITR-146 (AP)] on the subject of “Permanent Establishment”, the Andhra Pradesh High Court observed:

    “The words “Permanent Establishment” postulate the existence of a substantial element of an enduring or permanent nature of a foreign enterprise in another, which can be attributed to a fixed place of business in that country. It should be of such a nature that it would amount to a virtual projection of the foreign enterprise of one country onto the soil of another country.”

    The existence or otherwise of a Permanent Establishment is determined by applying the following tests:

    Objective Tests Subjective Tests Functional Tests
    The place of business test The right of use test The business activity test
    The location test The permanence test The business connection test

    Permanent Establishment liabilities can be avoided by a company in legal and appropriate ways, but solutions will depend on your business model and it is best to consult an expert in India.

    For the last 20 years,Maier+Vidorno,  has been addressing these business needs of overseas companies.  We also offer support services in areas of sales, service, warehousing manangement, finance, accounting, and HR consultingContact our team for more information.