Based on the facts of the case, our international tax experts carried out a detailed PE analysis and provided their views along with mitigation strategies.
On initial research, it appeared that the company had a fixed place PE exposure in India. However, we discovered that it was possible to argue that the company did not satisfy the disposal test as it did not have complete control over the assets or equipment.
Furthermore, we also observed that the assets or equipment were kept at various locations of the Indian subsidiaries. Accordingly, since the assets were located at multiple locations, the assets or equipment cannot be considered as a fixed place.
We advised the client that in order to completely mitigate the risk, it would be advisable that the asset or equipment be purchased directly by the Indian subsidiaries from third-party vendors instead of the parent company.
Our detailed advice helped the client to have a clear and comprehensive understanding of the PE exposure and the ways to minimize risks in India. The advice also helped the client in ensuring that appropriate documentation are in place which would eventually help in defending its case before the Indian tax authorities and avoid protracted litigation.
