Secondment & Deputation Planning

Growing cross border connect and globalization has resulted in a marked rise in personnel movement across international borders. From a tax perspective, however, this gives rise to a host of issues both for the employer as well as the employee. Employees and corporates alike often face difficulty in understanding their tax liabilities in relation to the period of secondment or deputation of the employee. Determining residency status, ascertaining what incomes are taxable in India and in the Country of secondment and availing a tax credit in accordance with Double Taxation Treaty arrangements are some of the areas where individuals commonly require assistance.

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    Our services in this area include:

    • Determining residency status and tax incidence for the seconded employee
    • Filing Indian and foreign tax returns with DTAA benefits to mitigate effect of double taxation
    • Analysing tax treatment of ESOPs to seconded employees
    • Salary structuring to manage global tax exposures
    • Analysing taxability of social security benefits
    • Analysing tax implications on the Company/ employer
    • Reimbursement of salary cost – tax implications in the hands of the Indian Company
    • Analysing whether the secondment results in formation of a permanent establishment in India for tax purposes
    • Transfer Pricing implications when secondment/ deputation is to an associated enterprise

    Some cases that you may relate to are detailed below:

    • Mr. Rahul is a UK employee deputed to India since the year 2006. According to Residency Rules in India, for the FY 2015-16, he qualifies as a ‘Resident’. He is also returning to his home country on July 31, 2016. In the present scenario, since the employee qualifies to be a Resident in India, his worldwide income will be subject to tax in India. Therefore, salary earned for the period August 1, 2015 to March 31, 2016 will be taxable in India and exemptions under DTAA- Double Taxation Avoidance Agreement will apply. On considering DTAA provisions and Indian Income Tax Act, the client was advised accordingly.
    • Mr. Rahul is employed in a software company in India. During the year 2008, he was deputed to Germany. For the year 2008-2009, contribution was made towards Social Security in Germany and from 2009 to 2013, contribution was made to Provident Fund in India. Mr. Rahul who sought our assistance, was provided with Tax consultation with respect to Double Taxation Avoidance Agreements, Social Security Agreements with Germany, Refund of contribution and Tax Planning of the same.


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