International Business Structuring & Cross-Border Advisory

Cross-border tax structuring is the deliberate design of the legal entities, ownership chains, intercompany agreements, and financing flows through which a business operates across multiple countries, with the goal of minimising total global tax liability while remaining fully compliant in every jurisdiction. It matters because, without deliberate design, the same income can be taxed twice — once in the country where it is earned and again in the country of the entity's residence — and without a DTAA-compatible structure, the withholding taxes on cross-border payments (dividends, royalties, management fees, interest) can absorb a significant portion of group profit.

A DTAA is a bilateral tax treaty between India and another country that allocates taxing rights over different categories of income — dividends, interest, royalties, capital gains, business profits, and salaries — between the two countries. India has DTAAs with over 90 countries. The treaty typically limits the withholding tax that the source country can levy on payments to residents of the other country (for example, reducing the standard 20% Indian withholding on royalties to a lower treaty rate), and determines whether the business is treated as having a Permanent Establishment (PE) in the source country. To claim DTAA benefits, the recipient must be a tax resident of the treaty country and must satisfy any Limitation of Benefits (LOB) or Principal Purpose Test (PPT) requirements in the applicable treaty.

Both are used extensively, but for different reasons. UAE (specifically Dubai or Abu Dhabi Free Zones) is typically preferred for: founders or promoters who are UAE residents, businesses with significant Gulf and MENA market exposure, businesses that benefit from UAE's 0% personal income tax environment, and groups wanting UAE as a regional hub. Singapore is typically preferred for: tech and digital businesses with APAC operations, IP-intensive businesses (Singapore's IP incentives), businesses targeting US/global investors familiar with Singapore structuring, and businesses that want English-law governed corporate documents. The key difference in treaty terms: India-UAE DTAA and India-Singapore DTAA have different rates and provisions. Post-MLI, both require genuine substance in the holding jurisdiction.

Overseas Direct Investment (ODI) is an Indian resident's investment in a foreign entity — through equity, compulsorily convertible preference shares, or loan — that results in a lasting interest (typically at least 10% ownership or any ownership with board representation). Under the FEMA Overseas Investment Rules, 2022, ODI by an Indian resident individual or company must be registered on the FIRMS portal of the RBI before or simultaneously with the investment. Ongoing obligations include: Annual Performance Report (APR) by 31 December each year for each ODI entity, filing of any changes in the foreign entity's capital structure or ownership, and prior RBI approval for ODI into financial sector entities.

The Annual Performance Report is an annual FEMA filing that every Indian entity or individual with an Overseas Direct Investment must submit to the RBI through the FIRMS portal by 31 December each year, covering the financial year ended 31 March. The APR includes the financial performance of each overseas entity (revenue, profit, net worth), the equity and loan balances, and details of dividends received. It must be certified by the statutory auditor of the overseas entity. If the APR is not filed by the due date, a late fee is levied under FEMA compounding provisions, and the FIRMS portal may restrict further ODI-related filings until arrears are cleared.

The Foreign Liabilities and Assets (FLA) Return is an annual RBI survey that must be submitted by 15 July each year by any Indian company that has received Foreign Direct Investment (FDI) or has made Overseas Direct Investment (ODI) — or both. It is filed directly on the RBI FLAIR (Foreign Liabilities and Assets Information Reporting) system. The FLA captures the balance sheet position of FDI and ODI — the stock of foreign assets and liabilities of the Indian company. Failure to file or late filing attracts a penalty under FEMA. Companies that received FDI in a prior year but have fully repatriated must still file until the portfolio is nil.

Transfer pricing rules apply to any transaction between an Indian company and a related foreign company — collectively called 'associated enterprises' under Section 92A of the Income-tax Act. The rules require that the price of such intercompany transactions be at 'arm's length' — what independent parties would agree in comparable circumstances. Covered transactions include: payment of management fees, royalties, or licence fees to a foreign parent or subsidiary; purchase or sale of goods or services with a foreign related party; interest on cross-border loans; guarantee fees; and any other financial dealings. Transfer pricing documentation (a TP study) must be maintained for any Indian entity with international transactions exceeding ₹1 crore in aggregate value with associated enterprises. Form 3CEB — a CA certificate on the TP study — must be filed with the income-tax return.

A Permanent Establishment is a fixed place of business through which a foreign enterprise carries on business in a country. If your Indian company has a PE in another country, that country can tax the income attributable to the PE at its corporate tax rate — creating a tax liability you may not have planned for. PEs can arise in several ways: maintaining a fixed office or equipment in a country (fixed place PE), having an agent in a country who has authority to conclude contracts on your behalf (dependent agent PE), or conducting construction or service activities in a country beyond certain time thresholds (service PE). DTAAs define what constitutes a PE for treaty purposes — and the threshold periods and conditions vary by treaty.

The Principal Purpose Test is an anti-avoidance rule that has been incorporated into India's tax treaties through the Multilateral Convention (MLI), which India ratified. Under the PPT, treaty benefits (reduced withholding rates, capital gains exemptions, business profit allocations) can be denied if one of the principal purposes of the arrangement or transaction was to obtain those benefits and granting those benefits would be contrary to the object and purpose of the treaty. In practice, this means that a holding company set up in a treaty jurisdiction primarily to access treaty benefits — with no real business activity, no employees, no management decisions taken in that jurisdiction — can be denied treaty benefits by the Indian income-tax authorities.

GAAR (Sections 95–102 of the Income-tax Act) empowers the Indian income-tax authority to deny tax benefits where an arrangement is an 'impermissible avoidance arrangement' — one that lacks commercial substance, has been entered into primarily for obtaining a tax benefit, and lacks bona fide business purpose. GAAR can override the terms of a tax treaty if the arrangement is found to be an impermissible avoidance arrangement. GAAR does not apply where the main purpose of an arrangement is not to obtain a tax benefit, where the aggregate tax benefit is below ₹3 crore, or where the arrangement is grandfathered (investments made before 1 April 2017 in certain cases). GAAR is applied only with the approval of a designated commissioner — it is not routinely applied.

The India-UAE Double Taxation Avoidance Agreement was signed and entered into force in 1993 and covers residents of India and the UAE. Key provisions: Dividends paid by an Indian company to a UAE resident are taxable in India at a rate not exceeding 10% (for a UAE company holding at least 10% of the Indian company's capital) or 15% in other cases, compared to the standard Indian withholding rate of 20% plus surcharge and cess. Interest is taxable in India at not exceeding 12.5%. Royalties and fees for technical services are taxable at not exceeding 10%. Capital gains on the sale of shares of an Indian company: the treaty allocates taxing rights to India for most capital gains — capital gains on Indian company shares are generally taxable in India regardless of the treaty. The MLI has been applied to modify the India-UAE DTAA to include the PPT.

The UAE introduced a federal Corporate Tax (CT) at 9% on taxable income above AED 375,000, effective for financial years beginning on or after 1 June 2023, administered by the Federal Tax Authority (FTA). Income below AED 375,000 is taxed at 0%. Qualifying Free Zone Persons (QFZPs) can benefit from a 0% CT rate on qualifying income, provided they pass the Qualifying Activities test and Excluded Activities test, maintain adequate substance in the free zone, and do not have a domestic permanent establishment in the UAE mainland. Dividends and capital gains received by a UAE holding company from a qualifying subsidiary may be exempt under the Participation Exemption provisions (generally applicable where the UAE HoldCo holds at least 5% in the subsidiary for at least 12 months). The interaction with the India-UAE DTAA means: if the UAE entity pays UAE CT on income, it may claim a credit for Indian withholding tax suffered; and Indian withholding tax on dividends, royalties, or fees paid to the UAE entity must still be correctly managed.

Section 9(1)(i) of the Indian Income-tax Act deems income to accrue or arise in India if it arises from the transfer of a capital asset situated in India. In 2012, this provision was retrospectively amended (and the retrospective element subsequently withdrawn) and then clarified in 2016 to provide that the transfer of shares or interest in a foreign company is deemed to be situated in India if, on the specified date, the value of Indian assets exceeds 50% of the fair market value of all assets of the foreign company (directly or through a chain of subsidiaries). In such cases, the capital gains from the sale of shares of the foreign company are taxable in India as if they were from a transfer of Indian assets, at the applicable capital gains rates.

Form 15CA is an online declaration filed by the Indian payer on the income-tax e-filing portal before making any remittance outside India that is taxable in India. Form 15CB is a certificate issued by a CA that verifies the nature of the payment, the applicability of a DTAA, and the correct tax withholding (TDS). The two forms are linked: in cases where a CA certificate is required, Form 15CB is prepared first, and then Form 15CA is filed using the details from Form 15CB. The bank requires both forms (where applicable) before processing a cross-border remittance. Not all payments require both forms — there is a prescribed list of exempted payments, and the rule varies based on the nature and amount of the payment.

Yes, if the aggregate value of international transactions with associated enterprises exceeds ₹1 crore in a year, transfer pricing documentation is mandatory. There is a Safe Harbour provision under Rule 10TD of the IT Rules for certain categories of qualifying transactions (IT services, KPO services, contract R&D, specified financial transactions) that provides a defined arm's length price — if the entity's actual pricing falls within the safe harbour range, the TP documentation requirement is simplified and there is no TP adjustment by the authorities for those transactions. Safe harbour elections are made in Form 3CEFA filed by the taxpayer.

CbCR (Form 3CEAD under the Indian Income-tax Rules) is a report required from the ultimate parent entity of a multinational group if the consolidated group revenue exceeds ₹5,500 crore (approximately USD 660 million) in the immediately preceding accounting year. The CbCR reports revenue, profits, income tax paid and accrued, employees, stated capital, retained earnings, and tangible assets for each country where the group has operations. It is exchanged between tax authorities of different countries under the Multilateral Competent Authority Agreement (MCAA). In addition, a Master File (Form 3CEAA) is required if the Indian constituent entity of a qualifying international group meets the prescribed monetary thresholds.

An Indian resident individual can hold shares in a foreign company directly in their personal name — this is ODI by an individual, governed by the FEMA Overseas Investment Rules, 2022. The individual must register the ODI on FIRMS and file APRs. However, an Indian holding company structure is often preferred for: tax efficiency (company can receive dividends at corporate rate and manage taxation more efficiently than individual at slab rate), operational flexibility, ability to consolidate group financials, and investor-readiness (investors typically want a clean corporate holding structure rather than personal holdings). The optimal approach depends on the individual's tax residency, income profile, and the nature of the overseas business.

A foreign subsidiary is a separate legal entity incorporated in the overseas jurisdiction, owned (wholly or partly) by the Indian company. It has its own legal personality, its own tax identity, its own assets and liabilities, and is subject to local corporate governance requirements. A branch is not a separate legal entity — it is an extension of the parent company in a foreign country. The branch's assets and liabilities are the parent's assets and liabilities. Tax treatment differs: the subsidiary's profits are taxed in the overseas jurisdiction, and repatriated to India as dividends subject to applicable withholding tax and DTAA. The branch's income may be taxed both in the overseas jurisdiction (as a branch) and potentially in India, with a tax credit mechanism to avoid double taxation.

To qualify as a Qualifying Free Zone Person (QFZP) under UAE Corporate Tax law and benefit from the 0% tax rate on qualifying income, a UAE Free Zone entity must: (a) maintain adequate substance in the UAE Free Zone (employees, office, decision-making); (b) earn only qualifying income as defined by the Cabinet and Ministerial decisions; (c) not earn more than a permissible threshold of non-qualifying income (generally 5% of total revenue or AED 5 million, whichever is lower); (d) maintain audited financial statements; and (e) not have a domestic PE in the UAE mainland (or manage any mainland income separately under 9% CT). The specific qualifying activities are listed in the relevant UAE Ministerial Decision.

The India-Singapore DTAA includes a Limitation of Benefits (LOB) clause that restricts treaty benefits to Singapore residents who meet certain conditions relating to substance. To claim treaty benefits (particularly the capital gains exemption on sale of shares of an Indian company), the Singapore entity must have: (a) at least 50% of its shares beneficially owned by individual Singapore residents or qualifying bodies; or (b) be listed on a recognised stock exchange in Singapore; or (c) be a recognised institutional investor under Singapore law; or (d) satisfy a principal purpose test. Post-MLI, the PPT has been added as an additional check. Singapore entities that are pure holding companies owned by Indian residents — without any Singapore-based economic activity or independent management — face high risk of being denied treaty benefits.

A Controlled Foreign Corporation (CFC) rule is a provision in domestic tax law that attributes the income of a foreign subsidiary to its parent company's taxable income in the parent's jurisdiction — to prevent profit shifting into low-tax foreign subsidiaries that do not distribute dividends. India currently does not have comprehensive CFC rules in its domestic tax legislation. The Income-tax Act has limited provisions addressing overseas income attribution in specific situations (such as Section 9 for income deemed to accrue in India), but not a full CFC regime. However, Indian tax residents investing into foreign jurisdictions should be aware that other countries' CFC rules (notably the US PFIC/CFC rules, UK CFC rules, and German CFC rules) may apply if the foreign entity is controlled by residents of those countries.

Under the current Indian income-tax framework, dividends received by an Indian company from a foreign subsidiary are taxable in India as business income at the applicable corporate tax rate (approximately 25.17% under Section 115BAA or 30% plus surcharge and cess otherwise). A credit is available for the tax paid in the foreign jurisdiction on the income out of which the dividend is paid (indirect tax credit under Section 91 of the IT Act, applicable to countries where no DTAA exists, and directly through the DTAA credit provisions where a treaty exists). The withholding tax deducted in the foreign jurisdiction on the dividend (if any) is also creditable against Indian tax. The effective rate on repatriated foreign profits depends on the foreign tax rate, the withholding rate, and the applicable Indian rate.

Countries can relieve double taxation on the same income in two main ways. The exemption method: the country of residence of the recipient exempts the income from tax (because the source country has already taxed it) — preventing double taxation by allowing only one country to tax. The credit method: both countries tax the income, but the residence country allows a credit for the tax paid in the source country — resulting in effective taxation at the higher of the two rates. India predominantly uses the credit method — Indian residents pay Indian tax on global income, and credit the foreign taxes paid. The actual method applicable to specific categories of income is determined by the relevant DTAA.

FC-GPR (Foreign Currency — Gross Provisional Return) is an RBI filing that must be made on the FIRMS portal within 30 days of the date of issue of equity shares, CCPS, or other FDI-eligible instruments by an Indian company to a person resident outside India. The FC-GPR reports the details of the foreign investment received: the name and country of the foreign investor, the amount received, the number and class of shares issued, the price per share, the valuation basis, and the sector. A Chartered Accountant's certificate (Form 15CB in certain cases) and the FEMA declaration must accompany the filing. Subsequent equity transfers between residents and non-residents are reported on FC-TRS (Foreign Currency — Transfer of Shares).

Overseas Direct Investment (ODI) is an Indian resident's investment (equity or compulsorily convertible instruments) in a foreign entity that results in a lasting interest. For Indian companies, ODI is capped at 400% of the Indian company's net worth as per the last audited balance sheet, unless prior RBI approval is obtained. For Indian resident individuals, the annual ODI limit is USD 250,000 per financial year under the Liberalised Remittance Scheme (LRS), which includes all capital and current account transactions. ODI in financial sector entities (banking, insurance, financial services) requires prior RBI approval regardless of amount.

The Liberalised Remittance Scheme (LRS) allows Indian resident individuals to remit up to USD 250,000 per financial year for any permissible current or capital account transaction — including overseas direct investment, purchase of property abroad, maintenance of close relatives, travel, and education. LRS cannot be used for: purchase of foreign exchange abroad, purchase of lottery tickets, purchase of proscribed magazines, call options or put options in overseas markets for speculative purposes, or investment in countries identified by the Financial Action Task Force (FATF) as non-cooperative. LRS is the standard route for NRIs' family members in India to remit funds abroad, and for individual promoters making ODI into an overseas startup.

FC-TRS (Foreign Currency — Transfer of Shares) is an RBI filing required when shares of an Indian company are transferred between a person resident in India and a person resident outside India — in either direction (Indian selling to foreign buyer, or foreign shareholder selling to Indian buyer). The FC-TRS must be filed within 60 days of the transfer of shares. The reporting requirement applies to both primary and secondary transactions — any change in the FDI register resulting from a transfer must be reported. The filing includes details of the transferor, the transferee, the number and class of shares, the transfer price, and the valuation basis (as required by FEMA's pricing guidelines).

PNPC has active offices in Chennai, Bangalore, Hyderabad, and Dubai. For India-UAE cross-border matters — whether it is an Indian company setting up in the UAE (ODI route), a UAE resident setting up in India (FDI route), or an existing India-UAE group optimising its structure — we handle both sides under a single engagement. India-side: RBI/FEMA filings, income-tax advisory, DTAA analysis, transfer pricing, Form 15CA/15CB, ITR and MCA annual compliance. UAE-side: trade licence and free zone setup, UAE Corporate Tax registration and return, FTA VAT compliance, WPS payroll. The India-UAE DTAA advisory, the substance assessment, and the group structure optimisation are handled as a unified matter — not split between two firms with different briefs and no coordination.

Thin capitalisation refers to financing a company predominantly with debt (loans) rather than equity, often to generate tax deductions on interest payments in a high-tax jurisdiction while the corresponding interest income is received in a low-tax jurisdiction. India introduced a specific anti-thin-capitalisation rule under Section 94B of the Income-tax Act, applicable from Assessment Year 2018-19. Under Section 94B, where an Indian company (or a foreign company's Indian branch) pays interest to an associated enterprise, and the interest exceeds ₹1 crore, the interest deduction is restricted to 30% of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) or the total interest paid to associated enterprises, whichever is lower. The disallowed excess interest can be carried forward and set off against future EBITDA for a period of 8 subsequent assessment years.

A Tax Residency Certificate is a certificate issued by the tax authority of a country confirming that a person (individual or company) is a resident of that country for tax purposes in the relevant year. In cross-border transactions, the TRC is the primary document by which a foreign recipient proves to the Indian payer that they are entitled to claim reduced withholding tax rates under the applicable DTAA. Without a valid TRC for the relevant year, the Indian payer must deduct TDS at the higher domestic rate (typically 20% or 30% plus surcharge and cess) rather than the lower DTAA rate. The TRC must typically be renewed annually, and must cover the period of the payment.

When an Indian company issues shares to a foreign investor under the FDI route, the following reporting sequence applies: (a) FC-GPR filed on FIRMS portal within 30 days of share allotment; (b) FLA return filed by 15 July of the following year, covering the FDI received; (c) FCGPR annual return (the FIRMS portal aggregates FDI data which feeds into RBI statistics); (d) if the investment is in a regulated sector, prior approval from the relevant sectoral regulator may be required before or after the investment; (e) the company must also report any subsequent changes in the foreign ownership (through FC-TRS on transfers, or further FC-GPRs on fresh allotments).

In most sectors, a foreign company can set up a 100% wholly-owned subsidiary in India through the automatic route — without prior government approval. However, certain sectors are subject to FDI caps, conditions, or require government approval: insurance (74% FDI cap, with conditions), banking — private (74% FDI cap), defence (74% automatic route, above 74% government route), broadcasting (26% to 100% depending on the segment), print media (26% FDI cap), multi-brand retail trading (51% cap, with conditions), and a few others. Some sectors prohibit FDI entirely: atomic energy, lottery, gambling, betting, chit funds. The DPIIT FDI Policy document (updated periodically) is the definitive reference — the caps and conditions change from time to time.

Bank account opening for an overseas subsidiary requires: (a) Certificate of Incorporation of the overseas entity; (b) Memorandum and Articles of Association or equivalent constitutional documents; (c) Board resolution authorising the opening of the account and designating authorised signatories; (d) Passports of all directors and authorised signatories; (e) Proof of registered address of the company; (f) Ultimate Beneficial Owner (UBO) declaration — most overseas banks require this under KYC/AML regulations, disclosing any person who directly or indirectly owns more than 25% or has control; (g) Source of funds declaration; (h) Business description and evidence of business activity. UAE and Singapore banks have specific AML/KYC requirements that have become more stringent in recent years.

The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (the MLI) is an OECD instrument that allows signatory countries to modify multiple bilateral tax treaties simultaneously, without negotiating each treaty individually. India ratified the MLI in 2019. The MLI's modifications to India's treaties include: the Principal Purpose Test (PPT) as an anti-abuse rule, the dependent agent PE provisions (expanded to prevent PE avoidance through commissionnaire and similar structures), and modifications to the arbitration and dispute resolution provisions. The MLI applies to a treaty between two countries only where both countries have ratified the MLI and elected to apply it to that bilateral treaty. Not all of India's treaty partners have ratified the MLI.

Cross-border advisory requires simultaneous competence in: Indian income-tax law and DTAA interpretation, FEMA and RBI regulations (a distinct regulatory framework from income-tax), Companies Act compliance for the Indian entity, UAE or Singapore or other jurisdiction local law and tax, transfer pricing methodology and documentation standards, and the interaction between these frameworks. Most Indian CA firms have deep expertise in income-tax and MCA compliance but limited FEMA or overseas jurisdiction competence. Most overseas firms have no India expertise. PNPC's combination of practising offices in India and Dubai — with a CA team that works across both jurisdictions daily — means that India-UAE cross-border advice is given by a single team that understands both sides, without the information loss and coordination failure that comes from using two separate firms.

BEPS — Base Erosion and Profit Shifting — is the OECD's global initiative to prevent multinational companies from using legal loopholes, mismatches in tax rules, and treaty provisions to shift profits to low-tax jurisdictions. The BEPS Action Plan of 15 actions has been adopted by over 140 countries, including India. The key BEPS measures that directly affect cross-border business structuring include: Action 2 (hybrid mismatch arrangements), Action 6 (treaty abuse — PPT and LOB), Action 7 (artificial PE avoidance), Actions 8–10 (transfer pricing for value creation — hard-to-value intangibles and risk allocation), Action 13 (CbCR and Master File), and Action 15 (the MLI). India has implemented most of these measures through the Income-tax Act, Rules, and MLI ratification.

Yes. This is one of the most common scenarios PNPC handles. Typical structure: a UAE entity (free zone company or Mainland LLC) for UAE operations, and an Indian Private Limited Company for India operations — with either (a) the UAE entity holding shares in the Indian entity (FDI into India from UAE), or (b) the NRI holding shares directly in both entities, or (c) the Indian entity holding shares in the UAE entity (ODI from India to UAE). The optimal choice depends on: the direction of primary revenue flows, the UAE CT treatment of each option, the India-UAE DTAA optimisation, the FEMA ODI/FDI requirements, the NRI's personal tax residency status, and the desired exit flexibility. PNPC advises on and implements all three structures from our Dubai and Chennai offices.

A straightforward India-UAE structure for a new business — incorporating both an Indian Private Limited Company and a UAE Free Zone entity, completing all FEMA filings, and establishing initial intercompany agreements — typically takes 8–12 weeks from the first advisory consultation. The India incorporation takes 3–5 weeks. The UAE free zone entity typically takes 2–4 weeks. FEMA filings (ODI registration or FC-GPR, depending on the direction of investment) are completed concurrently. Intercompany agreements are drafted in parallel. A more complex restructuring of an existing group — with multiple entities, historical compliance gaps, and significant transfer pricing issues — takes longer and must be scoped project by project.