India Rules Management of Client's Hotel Creates Fixed-Place PE

Taxpayer, a foreign company and tax resident of Luxembourg, entered into various agreements with an Indian company (I Co), the owner of a hotel in India, to provide multiple services (e.g., reservations, HR, technical, consultancy, procurement) in relation to the operation and management of I Co...

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Bibliographic Details
Published in:Journal of International Taxation 2018-09, Vol.29 (9), p.6-7
Main Authors: Joseph, Riad, Uchil, Sameep, Finnerty, Chris, Parsch, Kazuyo, Yap, Bee-Khun, Kapadia, Sudhir
Format: Article
Language:English
Subjects:
Agreements
Construction
Corporate income tax
Hotels & motels
Income taxes
International taxation
Nonresidents
Permanent establishment
Tax treaties
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Summary:Taxpayer, a foreign company and tax resident of Luxembourg, entered into various agreements with an Indian company (I Co), the owner of a hotel in India, to provide multiple services (e.g., reservations, HR, technical, consultancy, procurement) in relation to the operation and management of I Co's hotel. The Authority for Advance Rulings held that Taxpayer has a fixed permanent establishment (PE) in India at I Co's hotel through which Taxpayer conducted its core business activities, i.e., operation and management of the hotel. The hotel is at Taxpayer's disposal since it has absolute control, authority, and responsibility over the operations and management of all vital and important functions of the hotel. Consequently, income that Taxpayer earned through such an arrangement is taxable as "business profits." Under the India-Luxembourg income tax treaty, a nonresident enterprise creates a fixed PE in another country if it carries on business through a fixed place in the source country.
ISSN:1049-6378