Permanent establishment in India — service PE and secondments: what part of this actually needs a professional?
Some of it, yes — and we will say so on the call if that is the honest answer. The parts that are worth paying for are the ones where a missed election, a missed deadline or an unverified threshold costs more than the fee: a service presence can arise from personnel furnishing services in India for a period, and seconded employees can be treated as the Indian entity's or the foreign entity's depending on who is the real employer.
What if I have already filed and got it wrong?
That is a common starting point. We re-derive the position, identify whether an amendment or a disclosure route is the right vehicle, and tell you which one preserves the relief that is still available. The order matters more than the speed.
How long will it take?
It depends on the documents rather than on us. Once the pack is complete most filings turn around inside a fortnight; anything that needs a certificate from a tax authority runs on that authority's timetable, which we tell you at the start rather than at the end.
Can sending employees to India create a permanent establishment?
It can. A service presence can arise where personnel furnish services in India for a period, which means a taxable presence can be created by people rather than by premises. Groups that assume a permanent establishment requires an office are often surprised. India reads permanent establishment broadly, and its jurisprudence has repeatedly found a taxable presence where the foreign group thought it had only sent people to help. The right time to test the position is before the deployment is agreed, while the length of it, the nature of the work and the reporting lines can all still be shaped.
Who is the real employer of a seconded employee in India?
That is the question the whole analysis turns on. A seconded employee can be treated as the Indian entity's or as the foreign entity's, and the answer follows from where control sits, who directs the work, who bears the risk of it and who the employee is really accountable to, rather than from which entity's payroll processes the salary. Because the facts and the paperwork often point in different directions, the position is established from the actual working arrangements and then reflected in the documents, not assumed from a secondment agreement drafted for another purpose.
Is a cost reimbursement paid to head office taxable in India?
Cost reimbursement arrangements are the most litigated fact pattern in this area, so the honest answer is that it depends on what the reimbursement is really for. A payment that merely passes through the actual cost of an employee the Indian entity genuinely employs is a different thing from a payment for services the foreign entity has provided using its own people. The label on the invoice does not settle it. The analysis looks at the underlying arrangement, the employment reality behind it and the terms agreed, and records the conclusion before the payments begin.
How long can our staff work in India before a service PE arises?
A service presence can arise where personnel furnish services in India for a period, and the period that matters comes from the applicable treaty article rather than from a general rule, so the threshold is specific to the situation. What is common to every version of it is that the counting is a practical problem: time accumulates across individuals and across visits, and groups typically discover they have crossed a line because nobody was keeping a record. Tracking days from the start of a project costs very little; reconstructing them afterwards from expense claims is a different exercise.
Our Indian subsidiary pays the salary, are we still exposed?
Possibly. Where the salary is paid locally but the employee remains accountable to the foreign entity, takes instructions from it and works on its business, the payroll arrangement does not resolve who the real employer is. Equally, an employee genuinely integrated into the Indian entity does not become the foreign entity's simply because the cost is recharged. What matters is the substance of the relationship, tested against how the work is actually organised day to day. The exposure, if there is one, sits with the foreign entity, which is why it is worth establishing the position rather than inferring it from the payroll.
What records should we keep to defend our position on secondments?
The ones created while the arrangement is running, because the alternative is assembling them under a query years later. In practice that means the secondment terms as agreed, evidence of who directed and appraised the work, the basis on which costs moved between the entities, and a contemporaneous record of time spent in India by each person. A position supported by documents made at the time is a different proposition from one reconstructed from memory and expense claims. We set out what to keep at the outset and review it while the deployment is live.
What is OECD Pillar One?
The part of the international agreement that reallocates a share of taxing rights over the very largest and most profitable groups to the jurisdictions where their customers and users are, regardless of physical presence — plus a simplified approach to routine marketing and distribution returns. It is aimed at the digitalised economy problem that physical-presence rules could not reach, and its implementation is still moving, which is why we read the current instrument rather than the original blueprint. See BEPS and Pillar Two.
What is a permanent establishment, and how easily do we create one?
A taxable presence in another country under the treaty — typically a fixed place of business such as an office, branch, factory or workshop, or a dependent agent habitually concluding contracts on your behalf. Some treaties add a services test measured in days. Purely preparatory or auxiliary activity is excluded, but that carve-out is narrower than it sounds: one senior employee working from home in the other country, with authority, has been enough. See business profits and permanent establishment.
