International Taxation

What is International Taxation?

International taxation is the study or determination of tax on a person or business subject to the tax laws of different countries or the international aspects of an individual country’s tax laws.

Work out your tax residency

To understand your tax situation, you must first work out whether you are an Indian resident for tax purposes. Indian residents are generally taxed on their worldwide income from all sources. Foreign residents are generally taxed only on their Indian-sourced income, such as money they earn working in India.

Coming to India

To work in India you will need a work visa and a permanent account number. Your employer will withhold tax from your wages and deposit it to Indian government – you then lodge an annual tax return and government will send you a tax refund if you are entitled to one. You may also be entitled to superannuation (retirement savings).

If you are coming to India on a working holiday you will probably be taxed as a foreign resident. If you are coming to India to study in a course that is more than six months long, or are moving to India permanently, you will probably be taxed as an Indian resident.

Going overseas

Whether you will remain Indian resident or become a foreign resident, there are things you need to do to get your tax affairs in order. If you remain an Indian resident while working overseas, you must declare your worldwide income in your Indian tax return, even if tax was taken out in the country where you earned the income.

Investing in India

Foreign residents are taxed in India on income earned from their Indian investments. For interest, unfranked dividends and royalties, tax is generally withheld in India at the time of payment. But if you receive rental income from Indian properties or capital gains from selling Indian assets, you must declare these amounts in an Indian tax return.

Investing overseas

As an Indian resident you are taxed on your worldwide income, including your income from interests in foreign entities, renting overseas properties, and selling overseas assets. If you have paid tax on this income in another country, you can claim a foreign income tax offset in India.

Transfer Pricing

Transfer pricing refers to the pricing of goods, services or intangibles within a multinational organization, particularly in regard to cross-border transactions. The vast majority of global trade occurs between related-party entities. As global trade increases, companies are confronted more and more with complex issues associated with intercompany pricing. This is compounded because many countries have specific transfer pricing legislation, and the tax authorities within those countries aggressively pursue transfer pricing adjustments. It is no wonder transfer pricing is often listed as the single most important international tax issue facing multinational companies.