Globalization has facilitated seamless movement of personnel across countries.
Today, it is very common to find an overseas expatriate heading an Indian organization or Indian personnel performing sales functions overseas. While the movement of personnel is primarily governed by commercial and business rationales, it is equally important to consider the tax implications involved in the underlying arrangement. Depending on the operational arrangement, contractual terms, and the conduct of the parties involved, there could be a risk of Permanent Establishment being constituted by virtue of the cross-border movement of personnel. Additionally, there could also be withholding tax implications on one or both of the employers. In either case, the arrangement needs to be compliant from a transfer pricing perspective in both or all countries involved.
It is therefore, extremely critical to comprehensively consider the tax implications of such arrangements in the hands of both: the employer as well as the employee.
We assist companies in planning their employee secondment and deputation policies from a tax, social security and regulatory perspective.