Summary: 1. Case: Clifford Chance (India) • Special Bench of the Income Tax Appellate Tribunal • Article 7 (1) of the India / UK treaty: if the enterprise has a PE in the source country, then the source country is permitted to tax the profits which are "directly or indirectly attributable" to the PE • This approach differs from both the OECD model and the UN model • Article 7 (3) of India / UK treaty states how to calculate profits "indirectly attributabl" to the PE: a proportion of the global profits, based on the PE's relative contribution • Facts in case - UK firm provided legal services in regard to several projects in India - Work performed in India and outside India - Accepted that UK law firm had a PE in India (due to regular visits by partners and employees) • Issue: in calculating the profits "directly or indirectly attributable" to the PE, do you include profits which relate to work done outside India? • Special Bench: "no" • Unclear aspect from case: do you aggregate "profits directly attributable to PE" and "profits indirectly attributable to PE"? If so, is there not then double counting? For more information: - K.R. Sekar (Bangalore): krsekar@deloitte.com - C.A. Gupta (Mumbai): cgupta@deloitte.com - Rohinton Sidhwa (Delhi): rsidhwa@deloitte.com 2. Taiwan • Expected changes to be announced by Taiwan government (retrospective from 2011) - To obtain exemption from withholding tax on patent royalties, you will not need to register the patents in Taiwan - Exemption from withholding tax on knowhow royalties will be abolished - Exemption from withholding tax on technical service fees (during construction period) will be abolished - possibility of achieving an effective Taiwan tax rate of 3% For more information: - Cheli Liaw (Taipei): cheliliaw@deloitte.com.tw 3. India • Guidance released on APA program • Criticisms - No rollback - If no Article 9 (2) in treaty, then no bilateral APA - Use of Indian TP rules vs. OECD principles - Safeguarding confidential information - Circular 165 will likely be applied by SAT to the dividends articles in other double tax treaties (and possibly also the interest and royalties articles) For more information: - Anis Chakravarty (Mumbai): anchakravarty@deloitte.com - Shanto Ghosh (Boston): shghosh@deloitte.com 4. In brief • Thailand / Tajikistan treaty • China: record TP adjustment • India: increased TP adjustments • OECD: finalizes TP "safe harbor" guidance • BEPS: Google and Apple
