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TAXATION PROVISIONS REGARDING LIASION OFFICE

Posted By admin on December 25, 2013 No Comments
  • Foreign companies planning to do business in India set up a liaison office for undertaking promotional work as a prelude to actual commercial activities.
  • Since the liaison office is not permitted to do any commercial activities, it is generally taken that the existence of a liaison office will not make any difference in taxability of the foreign company in India.
  • It may be clarified that where the liaison office creates a Permanent Establishment or establishes a business connection, the foreign company would become liable to pay tax on the profits, which can be attributed to the liaison office. But if liaison office doesn’t create any of the aforesaid relationship, liaison office will not attract any income tax in India.
  • It can be concluded that the role of liaison office is very dicey as far as Indian tax law is concerned. If proper care is taken regarding the activities a liaison office should perform, tax incidence can be avoided.

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