Fixed place PE, service PE, dependent agent PE and digital PE risk analysis under the Income Tax Act and applicable DTAA for foreign companies with India operations, personnel or business connections.
Short, direct, on the record.
A PE is created when a foreign company has a fixed place of business in India (office, branch, factory), furnishes services through personnel exceeding the DTAA day threshold, has a dependent agent concluding contracts, or has a construction project exceeding the treaty duration. The specific thresholds depend on the applicable Double Taxation Avoidance Agreement.
Generally, a subsidiary is a separate legal entity and does not by itself create a PE. However, if the subsidiary acts as a dependent agent (habitually exercising authority to conclude contracts for the parent) or provides a fixed place at the parent disposal, a PE may be constituted. The OECD and Indian courts apply substance over form analysis.
A service PE arises when a foreign enterprise furnishes services in India through employees or other personnel who are present in India for an aggregate period exceeding the threshold specified in the applicable DTAA (commonly 90 days in any 12 month period under many Indian treaties, though this varies by treaty).
If a PE is constituted, the profits attributable to the PE are taxable in India at 40% (plus surcharge and cess for foreign companies). The foreign company must obtain a PAN, file income tax returns, and comply with transfer pricing regulations for transactions between the PE and the head office.
Share the parent jurisdiction, India operations and personnel deployment for a confidential PE risk assessment.