Question 1

Does a liaison office pay income tax in India?

Accepted Answer

Generally no business income tax, because a liaison office earns no income. It still deducts TDS on salaries, rent and fees, files an annual statement and keeps proper records. AU Corporate checks the position each year.

Question 2

Can a liaison office become a permanent establishment in India?

Accepted Answer

Yes, if it does more than liaison. A liaison office limited to representing the parent, collecting information and promoting the parent's trade is generally outside the taxable business connection, but selling, negotiating or concluding contracts can create a permanent establishment. AU Corporate reviews activities.

Question 3

What annual statement must a liaison office file with the tax department?

Accepted Answer

A liaison office must furnish an annual statement of its activities to the tax authorities within 60 days of the end of the financial year (Form 49C under the earlier law). AU Corporate prepares and files it, and checks the form number under the current law.

Question 4

Does a liaison office file an income tax return in India?

Accepted Answer

Usually there is no business income to report, but AU Corporate checks each year whether a return is needed, for example if any income arises, and files it where required. Employees' own returns are handled separately.

Question 5

Is money received from the head office taxable?

Accepted Answer

No. Inward remittances from the head office to fund a liaison office's expenses are not income of the office. AU Corporate keeps the bank certificates to show this to the AD bank and tax authorities.

Question 6

What is TDS and which payments does a liaison office deduct it on?

Accepted Answer

TDS is tax deducted at source. A liaison office deducts it on salaries, rent and fees to professionals and vendors, deposits it with the government and files quarterly returns. It needs a TAN. AU Corporate calculates, deposits and files.

Question 7

Does a liaison office need GST registration in India?

Accepted Answer

Generally not, because it makes no supplies. A liaison office may still need registration in some cases, such as on reverse charge for certain services, and AU Corporate checks each year. It cannot charge GST or invoice customers.

Question 8

Does transfer pricing apply to a liaison office?

Accepted Answer

Generally no, because a liaison office earns no income and does not sell to the group. But if a liaison office starts earning, such as through commission, that would breach its approval and bring tax and transfer pricing exposure. AU Corporate flags this early.

Question 9

How does a tax treaty help a foreign company with a liaison office?

Accepted Answer

India has tax treaties with most countries, including Russia and Sri Lanka, under which activities that are preparatory or auxiliary may not create a permanent establishment. A tax residency certificate and Form 10F may be needed. AU Corporate prepares the documents and opinions.

Question 10

How are expats working in a liaison office taxed in India?

Accepted Answer

An expat's salary for work done here is taxable here, whoever pays it, and the residence status, treaty and social security position matter. AU Corporate reviews each expat, deducts tax where needed and prepares their returns.

Question 11

What if the tax department says the liaison office is doing business?

Accepted Answer

AU Corporate reviews the facts and the office's activities, replies to the notice and represents the foreign company, with documents showing the office only liaised. Fees are agreed in writing.

Question 12

Is tax clearance needed to close a liaison office?

Accepted Answer

Generally yes. The AD bank asks for evidence that taxes and liabilities are cleared before closing funds are remitted. AU Corporate prepares the final filings and the paperwork.

Question 13

Can AU Corporate represent a liaison office in tax matters?

Accepted Answer

Yes. AU Corporate replies to notices and represents the foreign company before the tax authorities and tribunals, and handles any GST notice. AU Corporate handles this for foreign companies from more than 10 countries, including the USA, UK, Singapore, Australia, Germany, Japan and China. Fees are agreed in writing.

Tax Compliance for Your India Liaison Office

Tax Compliance for a Liaison Office: The Short Answer

Tax Compliance That Keeps the Office Within Its Role

You Get

What We Handle, Tax by Tax

Permanent Establishment Review

Annual Statement

TDS Compliance

Return Check

GST Position Check

Expat Taxation

Notices and Representation

Tax Clearance

What We Need from You

Approval Letter

Accounts

Tax Registrations

Expat Details

Notices

What's Included in the Package

One Team for the Rest of Your Liaison Office Compliance

Questions Before You Start

Need Tax Compliance Support for Your Liaison Office?