India rules · all investors
Secondees: India rules for foreign companies
CA Utsav Dogra, Chartered Accountant, ICAI M. No. 542375
A secondment agreement should state who directs the employee's work, who bears the cost and how any recharge is priced. Where the Indian company directs the work and bears the cost, it is usually treated as the economic employer, which supports the tax and PE position.
Structuring secondments
A secondment agreement should state who directs the employee's work, who bears the cost and how any recharge is priced. Where the Indian company directs the work and bears the cost, it is usually treated as the economic employer, which supports the tax and PE position.
Salary for work done in India is taxable in India, wherever it is paid. If the employee stays on the home payroll, the Indian company runs a shadow payroll to compute and deposit Indian tax monthly.
Recharges of seconded staff costs from the parent to the Indian company should be supported by the agreement and may attract GST under reverse charge; treated carelessly, they can also suggest the parent is providing services in India.
Checklist
- Secondment agreement
- Shadow payroll
- Certificate of coverage where available
- Recharge invoices and GST review
- Day-count tracking
Common mistakes
- No Indian tax withheld on home-paid salary
- Recharges without agreement
- Starting before the certificate of coverage
- Seconded staff directed by the parent
How this applies to your country
- USA to India en-US
- UK to India en-GB
- Japan to India en-JP
- Germany to India en-DE
- Singapore to India en-SG
- Australia to India en-AU
- China to India en-CN
- Hong Kong to India en-HK
- Russia to India en-RU
- Spain to India en-ES
- France to India en-FR
- UAE to India en-AE
Our service: Payroll and expatriates
Questions
Who withholds tax for a secondee paid abroad?
The Indian company, through a shadow payroll, when it is the economic employer or the salary relates to Indian work.
Does a secondment recharge attract GST?
It can, under reverse charge, depending on how the arrangement is structured.
Is salary paid abroad taxable in India?
Salary for work done in India is generally taxable in India wherever it is paid.
Queries
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