EXPATRIATE

Tax Regime In India for Expatriates with an overview of a change in Economy

Topics to be covered…… ,[object Object],[object Object],[object Object],[object Object],[object Object]

India today is fast changing – setting the pace for growth and stability… ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Yesterday… … and today

Growing GDP 1 Falling Inflation 2 Increasing International Trade 3 USD bn At 19993-94 prices at factor cost Source: KPMG analysis, Tata Statistical Outline 2005, Indiastat Indicators of a growing and stable economy

… Strong Forex Reserves 4 Increased Foreign Direct Investment 5

Understanding the drivers for growth.. Economic Growth Averages, Real GDP Source: IMF World Economic Outlook Database 1998 to 2004 World Growth: 2.7%

The drivers of India's Economic Growth ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Implication on human resources ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

The Cost Advantage…………… ,[object Object],[object Object],Salaries and wages as % of total labour costs Average labor costs amongst directly employed regular workers (All-India)

Compensation structuring options ,[object Object],[object Object],[object Object],[object Object],[object Object]

Tax Regime vis-à-vis expatriates and assignees Domestic tax law of host country Double Taxation Avoidance Agreement [s] Domestic tax law in India Other regulatory issues-exchange control and entry registration

Residential status Residential status Resident & Ordinarily resident (ROR) Resident Resident but Not Ordinarily resident (NOR) Nonresident (NR) Residency in India is determined by physical number of days stay in India ( > 182 Days) Broadly expatriates coming to India would become taxable on worldwide income from the 3rd or 4th financial year after arrival in India

None of the conditions satisfied Any one of the two conditions satisfied Non - Resident Resident ,[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],One or both the conditions satisfied None of the conditions satisfied NOR ROR Law from 1 April 2003

Incidence of tax Resident & Ordinarily Resident (ROR) Nonresident (NR) and Not Ordinarily Resident (NOR) ,[object Object],[object Object],[object Object],Income liable to tax in India Residential Status Broadly, NOR/NR not taxable in India on foreign sourced income

EXPATRIATES………????? ,[object Object]

Compensation and benefits offered to inbound expatriates ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Non-taxable/concessional taxation items for expatriates in India (some examples) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Dual employment contracts ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Employee incentive schemes [ESOPS] ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Employee Stock Option Scheme (ESOP) Employee Stock Purchase Plan (ESPP) Share Appreciation Rights (SAR) / Phantom Equity Plan (PEP)

Relief under domestic tax laws ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Relief under double tax treaties India has more than 65 Treaties with various countries ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Short-stay exemption under DTAA (caution points) ,[object Object],[object Object],[object Object],Benefits provided in India by local entity Taxable

Foreign Tax Credit under DTAA ,[object Object],[object Object],[object Object],[object Object],[object Object]

Withholding tax /compliance requirements under Indian tax laws ,[object Object],[object Object],[object Object],[object Object]

Fringe Benefit Taxation (FBT) in India effective 1/4/2005 ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Deemed fringe benefits (even where expenses not related to employees) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

FBT on foreign companies ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

FBT base: Industry specific rates Nature of industry Nature of expenditure Reduced presumptive base Hotel Hospitality 5% Carriage of passengers or goods by motor car. Repair, running & maintenance of motor cars (including fuel and depreciation) 5% Manufacture or production of Pharmaceuticals software ,[object Object],5% Construction Raw Materials 5% Carriage of passengers or goods by aircraft. Repair, running & maintenance of aircraft (including fuel and depreciation) Nil

Exchange regulations ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Visa and registration with the Foreigners’ Regional Registration Officer (FRRO) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Corporate tax issues associated with deputation of expatriates ,[object Object],[object Object],[object Object],[object Object]

Tax issues specific to outbound assignees ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Obligations of employer and employees ,[object Object],[object Object],[object Object],IN HOME …and… HOST COUNTRIES Note: Foreign employer also required to withhold India tax if remuneration taxable in India

Solutions to reduce tax costs ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Consider moving to NET PAY approach ,[object Object],[object Object],[object Object],[object Object]

ANKIT SETHI MOHAMED IMRAN TAJ 05A010 05A070 III Bcom A III Bcom A Efforts by ,

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