Question And Answer
Subject: International taxation
Answered by:
Date: August 28, 2022
Query asked by KARAN SHAH

Abcd solutions sdn bhd (ABCD) registered, incorporated  and resident in Malaysia. The shareholders comprising of 4 individuals ( 3 malaysian residents and 1 Indian residents). 3 malaysian residents are also the directors of the company.

Xyz the indian reaident shareholder based in India represents the company in meetings with suppliers in India. However the business decisions are made in Malaysia (by the 3 directors)

ABCD does not have any employees or place of business in India. ABCD derives 100% commission income from India.

Q1 – Based on above facts, does Xyz presence in India create a PE risk in India?

Q2 – If yes, what is tax / TDS applicable?

Q3 – If yes, then can ABCD get it’s commission in the form of FTS. Whether DTAA benefit be taken?

Q4 – Is dividend paid by ABCD to Xyz in India taxable and at what rate?

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As we understand XYZ is not acting on behalf of an enterprise and has, and does not habitually exercise, in India, an authority to conclude contracts in the name of the ABCD, then there is no risk of Agency PE in India. Dividends received from a foreign company will be included in the total income of XYZ and will be charged to tax at the rates applicable to XYZ.

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