Can a liaison office in India raise invoices to customers?
No. The permitted role is representation and communication for the head office, and earning income sits outside it. An invoice issued from the office is not only a regulatory problem: it is evidence that the office did something it was not set up to do, which is what creates a taxable presence for the head office. Where a customer in India needs to be invoiced, the invoice comes from the head office abroad and the office stays out of the transaction. A business that needs to sell in India needs a different form of presence.
What activities make a liaison office taxable in India?
Anything amounting to carrying on business rather than representing someone who does. Negotiating price, agreeing terms, taking orders, holding stock for delivery, or performing the work the customer is paying for will do it, whoever signs the contract and wherever it is signed. The test looks at what the staff in the office actually do day to day, not at the description in the approval. The practical protection is a written scope for each role, and an office that can show its people stayed inside it.
Does a liaison office have to file an Indian tax return?
Filing obligations do not switch off because the office earns nothing. A presence that has been approved, employs people and receives funds from abroad is expected to account for itself annually, and the return is also where the claim that no income arose is actually made. Treating an absence of income as an absence of filing leaves the head office with open years and no contemporaneous record of its position. Reporting is also where the regulator and the tax authority read the same facts, so the two accounts need to be consistent.
How is a liaison office funded if it cannot earn income?
From the head office, by inward remittance into the office's own account, and that trail is part of what shows the office is what it claims to be. Meeting local costs from a director's personal funds, a customer receipt or an affiliate's account breaks the story, even where the amounts are small and the intention innocent. Salaries, rent and professional costs should all be traceable to money sent in from abroad. Keeping the funding clean costs nothing at the time and is very hard to repair afterwards.
Can liaison office staff negotiate with Indian customers?
Representing the head office is permitted; committing it is not. Staff can explain products, answer technical questions, pass enquiries to the head office and support existing customers. Once they are discussing price, conceding terms or being relied on to close, the office has moved into business activity and the head office's exposure changes. The distinction is fine enough that it survives only with written authority limits, an escalation route for anything commercial, and correspondence showing that negotiation actually happened abroad.
What do we need before closing a liaison office in India?
Closure is a sequence rather than a single application, and the funds left in the office's account are the reason. The employment obligations have to be settled, the outstanding filings brought current, and the position on the office's activity confirmed, before the balance can be moved out of the country. Each of those depends on the ones before it. Businesses that apply to close first and file afterwards find the money sitting in a dormant account while the earlier steps are completed. Working backwards from the remittance is the quicker route.
What happens if the two countries disagree about which of them can tax me?
The treaty has a procedure for exactly that. You apply to the competent authority in your residence country, which takes the case up with its counterpart, and the two negotiate a position that removes the double taxation. Some treaties add binding arbitration if they cannot agree. It is slow and it runs on documents, so the practical work is preserving the record and filing protective claims while the clock runs. See our treaty work.
Can I avoid capital gains tax on a foreign property?
Not by virtue of it being foreign — there is no exemption for that, and the "keep it offshore" advice you may have read is how people acquire penalties rather than savings. What genuinely reduces the gain is ordinary and legitimate: principal residence relief where the property qualifies and the designation is made correctly, a properly built cost base including acquisition costs and capital improvements, the timing of the disposition, the treaty rules for real property, and credit for the foreign tax paid. See principal residence and foreign property.
