If a company in country A has its money stored Country B bank account, which country's Tax will be applicable?

[halowe9672box4mlscom]

If it depends on country, then which countries will charge no Tax for just putting money in their country's Bank account? Just Tax rate of Company's country not bank's.
Company's "Income" will be subject to Bank's county's Tax or company's country Tax?

 

[CaptK]

I would look at a Mauritius IBC with a Singapore bank account.
Many factors as to where your income is derived from, where you are domiciled, citizenship and business.

Would require a bit more info to determine best fit.

 

[Sols]

Chances are the company is considered tax resident in Country C, where you live.

 

[halowe9672box4mlscom]

I would look at a Mauritius IBC with a Singapore bank account.
Many factors as to where your income is derived from, where you are domiciled, citizenship and business.
Would require a bit more info to determine best fit.

@CaptK Income is derived from - US, I am resident & citizen of India & software business.

 

[JustAnotherNomad]

Then the income is most likely (almost guaranteed - unless there are some loopholes in the Indian tax code) taxable in India.

 

[ikan]

And, ... after company income tax paid in India, you still have to report in India values and savings amounts stored in Bank of country B.
If those savings produce interests, incomes, capital gain you'll have to report to both countries - and possibly in worst case pay Tax in both countries , unless non double tax treaty within those 2 countries.

 

[halowe9672box4mlscom]

@JustAnotherNomad thanks for the help, after your reply, I did some research & found that India uses POEM to determine if the offshore company is tax resident or not.
So, will just have to work on that.

 

[JustAnotherNomad]

It’s more or the same for all countries. You would need substance in some other country.
For example, you could have a marketing office in a country with low taxes. They could sell the services that your Indian business produces. The Indian business could have a small profit, while most of the profit would stay in the marketing company. But the marketing company would need a proper office, a local director etc., and there must be good reasons for such a setup, not just taxes.
For example, the company could be registered in the US as a corporation because you want to be closer to your US customers etc. Then it will be paying US corporate income tax, but there may be deductions.

 

[asilgulsar]

@JustAnotherNomad thanks for the help, after your reply, I did some research & found that India uses POEM to determine if the offshore company is tax resident or not.
So, will just have to work on that.

Since the income is derived in US and assuming board meeting and commercial decisions are taken in India, the company will become a tax resident in both the countries and will have to pay taxes in both. India-USA DTAA does not stipulate a tie-breaker rule for residency of companies, therefore the solution is to pay taxes in one country and claim foreign tax credit in the other country.

I would recommend filing the return and paying taxes in India first and claiming the credit in USA, since the reverse process tend to get into litigations.

 

[JustAnotherNomad]

I have no experience with either the US or India. That said, would the income really count as US sourced if all services were rendered from India? Would it depend on what percentage of the sales are in the US?

 

[asilgulsar]

I have no experience with either the US or India. That said, would the income really count as US sourced if all services were rendered from India? Would it depend on what percentage of the sales are in the US?

You are right. I had replied earlier under the wrong assumption that the company is incorporated in the US but managed in India.

Assuming the following to be the facts:

i) Company is incorporated outside of India and not in US;
ii) Management is from India (Board meeting held in India and key commercial decisions taken in India);
iii) Software based income derived from US.

It is not clear as to the location of incorporation other than a mention that it is an offshore company. However, since most DTAAs (other than India-USA) allow POEM to be the tie-breaker for residency, even thought the company is incorporated elsewhere , it will be a resident of India. Hence all incomes of the company will be taxable in India.

Further, unless a the income is derived through a permanent establishment in the US, business profits arising from USA of a company resident in India cannot be taxed in USA. In the current case, it is assumed that no such fixed place of business is available in US creating a PE through which the income is earned.

However, the India-USA DTAA allows USA to tax upto 10% of the income, if the same falls under "Fee for Technical Service" (Authorities usually argue that software service falls under this category). The person making the payment would be obligated to withhold taxes at this rate on the payments made to you, if applicable.

Apologies for the previous comment.

 

[JustAnotherNomad]

Wow, you seem really knowledgeable regarding US taxes and DTAs. Are you a CPA?

 

[asilgulsar]

Wow, you seem really knowledgeable regarding US taxes and DTAs. Are you a CPA?

I'm close to obtaining the CPA equivalent (CA) in India. So, still a student in International tax.

 

[halowe9672box4mlscom]

I'm close to obtaining the CPA equivalent (CA) in India. So, still a student in International tax.

@asilgulsar Great! You are a CA student. If I had to consult someone with this offshore / tax thing, Is CA / CPA the right person to go with? Or there is some other profession who specialized in this?

 

[asilgulsar]

@asilgulsar Great! You are a CA student. If I had to consult someone with this offshore / tax thing, Is CA / CPA the right person to go with? Or there is some other profession who specialized in this?

A CA will be able to help you with this, especially since it involves Indian income-tax. The firm I work with specialises in international taxation assignments, and I am sure we will be able to assist. Please let me know if you are interested.

 

[halowe9672box4mlscom]

A CA will be able to help you with this, especially since it involves Indian income-tax. The firm I work with specialises in international taxation assignments, and I am sure we will be able to assist. Please let me know if you are interested.

Whats name of your firm? I would like to know more. Do you have any website?

 

[asilgulsar]

I work in Manohar Chowdhry & Associates. You can obtain more details from the below website.

Manohar Chowdhry & Associates - Home

www.mca.co.in