Shared Service Center, Outsourcing, Tax, India
Captive shared services centers now exempt from taxation in India
15 Mar 2006 | (News)
In a significant ruling in the case of Morgan Stanley, India’s Authority for Advance Ruling held that subsidiaries of foreign companies providing support services do not constitute a permanent establishment and hence such foreign companies are not taxable in India. It added that even when a permanent establishment is in existence, global profits of the MNC would not be taxable in India provided the transactions between the parent and the subsidiary are on an arm’s-length basis. Essentially, this means that foreign companies’ Captive BPO outfits in India will not be taxed.
The ruling is extremely favorable for foreign firms looking at developing an offshore center in the country, and provides one more incentive for organizations to consider setting up their own captive operations rather than outsourcing them to a third party supplier.
Source: Alsbridge Outsourcing Blog
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