Google, Facebook won't have to pay domestic tax under new IT rules

Appointment of grievance officer does not imply permanent establishment, say officials

Social Media, Facebook, Twitter, Instagram

For digital multinationals such as Google, Facebook and Twitter, appointing grievance officers under new information technology (IT) rules does not imply that they have a “permanent establishment” in India. But if their local office performs business functions and contributes to revenue of the parent firm abroad, it may attract domestic taxes, said two people in the revenue department.

This has come in the wake of foreign tech companies and others seeking legal advice on the tax implications of the government’s new IT order. They are required to appoint chief compliance officer, nodal officer and grievance officer from India. These firms fear that such appointments may attract income tax anywhere between 25 per cent and 40 per cent.

“Creating any physical presence in the form of a grievance officer or a nodal officer, that too in compliance to government directions, will not create any business connection or permanent establishment,” said one of the two people cited above. Despite having local offices in the country, their entire income does not come under the tax net due to different tax structures under which they operate…See More

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