Does hiring a local sales agent create a taxable presence?
It can, without any office being taken. The test looks at what the person habitually does: concluding contracts on the enterprise's behalf, or playing the principal role leading to contracts the enterprise then routinely signs without material change. Someone who merely introduces prospects and passes them on is a long way from that. Someone who agrees the commercial terms and whose deals are approved as a formality is close to it. The status of the person is not the point either, since an employee, a contractor or a company can all fall within the test if they act for the enterprise in that way.
What counts as habitually concluding contracts on our behalf?
Regularity and substance, rather than a single transaction or a formal power of attorney. Habitually means as a normal part of the person's activity, judged over a sensible period and against the nature of the business, so a handful of very large contracts can be habitual where a handful of small ones would not be. On behalf of the enterprise includes contracts made in the person's own name that bind the enterprise in substance, and contracts for the transfer of the enterprise's property or the provision of its services. Look at the pattern of deals actually done, not at the wording of the mandate.
Is a commission agent dependent or independent?
The label decides nothing; the facts of the relationship do. What is examined is whether the person acts in the ordinary course of its own business, bears its own entrepreneurial risk, carries costs it cannot pass on, works for principals that are genuinely unconnected, and is at liberty to organise its work as it chooses. An agent that acts almost exclusively for one enterprise, follows its detailed instructions and takes no risk on the deals it arranges is unlikely to be treated as independent whatever the contract calls it. Evidence of a real portfolio of principals is usually the strongest point in the agent's favour.
Head office signs every contract. Are we safe?
Not on that fact alone. The test reaches a person who plays the principal role leading to the conclusion of contracts that the enterprise then concludes without material modification. Countersignature at head office is exactly the pattern the wording anticipates. What matters is whether the commercial bargain was struck by the person in that country: who set the price, agreed the specification, conceded the discount and settled the delivery terms. If head office genuinely negotiates, and can and does change terms, the position is different. That is a question about the correspondence and the approval records, not about the signature block.
Can a contractor rather than an employee be a dependent agent?
Yes. The test is about the function performed and the degree of independence, not about the form of engagement, so a self-employed representative, a consultant or a service company can all fall within it. Engaging someone as a contractor therefore changes very little by itself. It can even weaken the position, because contractors are often given wider practical latitude to agree terms in order to get deals done. What helps is genuine independence in fact: other unconnected principals, its own business risk, and no obligation to follow detailed instructions on how the work is carried out.
How much profit is taxed if we have a dependent agent?
Only what is attributable to the presence the agent creates, and that is computed after the agent has been properly remunerated for its own services. The two are separate steps that are often confused. First, the agent is an enterprise in its own right and is paid at arm's length for what it does. Then the foreign enterprise's presence is treated as a distinct enterprise and credited with the functions performed on its behalf in that country, the assets used and the risks controlled there. Where the agent does the selling but the enterprise bears the inventory and credit risk, the attributable profit is not nothing.
Do NRIs pay tax on money sent to India?
Sending your own funds to India is a transfer of capital, not income, so the remittance itself is not taxed. What is taxable is income the money then earns in India — interest, rent, capital gains — under the rules for the account type it sits in. Sending money out of India is the direction that needs certification before the bank will act. See NRE, NRO and FCNR accounts.
Is "fund transfer pricing" the same thing as transfer pricing?
No — and if you came here to calculate FTP, this is not it. Fund transfer pricing is a bank's internal allocation of funding costs and benefits between its own business units, a treasury and asset-liability management discipline used to measure branch or product profitability. Tax transfer pricing is about prices between legally separate related parties across borders, and about which country taxes the resulting profit. The words overlap; the fields do not. See our transfer pricing work.
