BEPS / OECD & Global Mobility Tax Advisory

BEPS stands for Base Erosion and Profit Shifting — the OECD/G20 project to stop multinational groups from shifting profits to low-tax jurisdictions disconnected from where real business activity occurs. India adopted several BEPS Actions into domestic law, most directly Action 13 (transfer pricing documentation and Country-by-Country Reporting, now Sections 92D, 286 and Rules 10DA/10DB of the Income-tax Rules). An Indian subsidiary of a multinational group does not need to be large itself to have obligations — the CbCR threshold is measured at the consolidated group level, so even a small Indian entity within a large global group can trigger a Master File and CbCR intimation requirement.

The Country-by-Country Report obligation applies to a group where the consolidated group revenue for the preceding accounting year exceeds the threshold prescribed under Rule 10DB of the Income-tax Rules. The Master File's detailed Part B similarly applies based on the group's consolidated revenue and international transaction value thresholds under Rule 10DA. Because these thresholds are prescribed in the Rules and can be revised, PNPC checks the current threshold figures against your group's actual consolidated financials for the relevant year rather than relying on a remembered number from a prior engagement.

Form 3CEAA has two parts. Part A is a basic disclosure that every constituent entity of an international group must file, essentially regardless of size. Part B — the detailed Master File covering the group's business description, intangibles, intercompany financing, and functional profile — is only required where the group crosses the consolidated revenue and international-transaction-value thresholds under Rule 10DA. A common error is filing only Part A when the group has actually crossed into Part B territory, or over-filing Part B when it was not required. PNPC checks the current year's group figures against the applicable thresholds before scoping the filing.

Form 3CEAC is an intimation — filed by every constituent entity resident in India that is part of an international group in-scope for CbCR — notifying the tax department which entity in the group will file the actual Country-by-Country Report (Form 3CEAD) and in which country. Its due date is at least 2 months before the due date for filing the CbCR itself, making it an earlier and distinct deadline from both the CbCR and the income tax return. Finance teams that track only the income-tax due date and the CbCR due date frequently miss this intimation entirely because it does not appear on a standard tax compliance calendar.

Usually the Indian entity still files Form 3CEAC (the intimation) even if the parent's CbCR filed abroad satisfies India's information needs through the automatic exchange of information network. However, if the parent's home jurisdiction has no exchange-of-information agreement with India in force, or if the parent fails to file its CbCR on time, a secondary filing obligation can shift to the Indian constituent entity (or another group entity) as an Alternate Reporting Entity. PNPC monitors the parent's filing status each year to confirm whether India's obligation remains satisfied by exchange or has become a primary filing requirement.

Section 271GB prescribes penalties for CbCR-related defaults: failure to furnish the report attracts a penalty starting at a prescribed daily rate for the first month of default and escalating for continued default beyond that period, with a separate and higher rate if the default continues after a penalty order is served. Furnishing inaccurate information in the CbCR also attracts a separate penalty. Failure to maintain or furnish the Master File attracts penalty under Section 271AA. PNPC treats these deadlines as fixed calendar commitments precisely because the daily-accrual structure of the penalty makes even short delays costly.

A foreign company can become taxable in India on a portion of its profits if it is found to have a 'Permanent Establishment' here — commonly a fixed place of business, or an employee habitually concluding contracts in India on the foreign company's behalf, or (under some DTAAs) employees providing services in India for a threshold number of days. Indian tribunals and courts have found PE to exist from patterns that look informal on the surface — repeated short visits by the same employees, an employee working from a home office in India for an extended stint, or a local team member who effectively negotiates deals even without formal signing authority. This is a live and increasingly scrutinised risk area, consistent with the BEPS Action 7 push to prevent artificial avoidance of PE status.

Section 6 of the Income-tax Act sets the primary tests: a person is resident in India if present for 182 days or more in the financial year, or present for 60 days or more in the financial year and 365 days or more in the preceding 4 years (subject to relaxed thresholds for Indian citizens/Persons of Indian Origin visiting India, and for Indian citizens leaving India for employment abroad). A separate deemed-residency rule under Section 6(1A) applies to Indian citizens with total income (excluding foreign-source income) above a specified threshold who are not liable to tax in any other country by reason of domicile or residence. Within 'resident,' a person can further qualify as 'Resident but Not Ordinarily Resident' (RNOR) under Section 6(6) if they were non-resident in 9 of the preceding 10 years, or present in India for 729 days or fewer during the preceding 7 years — RNOR status narrows the scope of taxable income to India-sourced income plus income from a business controlled from India.

First, project the employee's Indian residency status for each financial year of the assignment based on actual day-count in India versus abroad — a two-year posting often spans a transition year where the person is RNOR or non-resident for part of the period. Second, review the India-UAE DTAA's dependent personal services article to determine which country has the primary right to tax the salary for any period the employee remains, even briefly, resident of both. Third, confirm Provident Fund treatment — India's International Worker provisions under the EPF scheme can apply to Indian employees working in a country with which India has a Social Security Agreement, and separately to foreign nationals working in India; the UAE does not have a general SSA with India covering most private-sector roles, so PF continuity needs case-specific review. Fourth, structure payroll so that Indian withholding under Section 192 reflects the employee's actual residency status in each period, not a static assumption made at the start of the assignment.

Resident but Not Ordinarily Resident (RNOR) is an intermediate residency category under Section 6(6) of the Income-tax Act. A returning NRI qualifies as RNOR if they were non-resident in India in 9 of the preceding 10 financial years, or were present in India for 729 days or fewer during the preceding 7 financial years. An RNOR is taxed only on India-sourced income and on foreign income from a business controlled from India or a profession set up in India — foreign investment income, foreign bank interest, and most other foreign-source income remain outside the Indian tax net during the RNOR period. This status typically lasts up to two or three years after return, depending on the exact day-count history, and represents a valuable transition window for returning professionals and retirees to reorganise their global finances before becoming a full 'resident and ordinarily resident' taxed on worldwide income.

Form 67 is filed on the income tax e-filing portal to claim Foreign Tax Credit (FTC) under Section 90/91 read with Rule 128, for tax paid in a foreign country on income that is also taxable in India. The rule requires Form 67 to be filed on or before the due date of filing the return of income for the relevant assessment year. Several assessing officers have denied FTC claims where Form 67 was filed after the ITR due date, even though a number of appellate authorities and courts have taken the view that the Form 67 timeline is directory rather than mandatory and have granted relief on appeal. PNPC files Form 67 within the original due date for every client claiming FTC, to avoid relying on a favourable outcome at appeal that is not guaranteed in every forum.

It can happen where dual residency arises and DTAA relief is not properly applied, or where the DTAA's short-stay exemption conditions (typically presence under 183 days, payment by or on behalf of a non-resident employer, and the cost not being borne by an Indian PE) are not all satisfied. Where genuine double taxation occurs despite correct treaty application — for example, timing mismatches between the Indian and foreign tax years — Foreign Tax Credit under Section 90/91 is the mechanism to relieve it, subject to Form 67 and the specific DTAA's FTC article. PNPC reviews both the treaty exemption route and the FTC route for every assignment, because relying on only one can leave a gap.

Many countries' DTAA short-stay exemption articles (and increasingly, domestic administrative guidance including in India) look beyond the legal employer named on the payslip to ask who is the 'economic employer' — the entity that actually bears the cost, risk, and direction of the individual's work during the assignment. If the host-country entity functions as the economic employer even though the home-country entity remains the legal employer, the short-stay salary exemption can be denied, and host-country withholding and PE analysis change accordingly. A secondment agreement that is silent on this point, or that contradicts the actual cost recharge in practice, creates exactly the ambiguity tax authorities look to challenge.

A foreign national working in India is taxed based on their Indian residency status under Section 6 — determined the same way as for an Indian citizen, primarily by day-count. If they qualify as non-resident or RNOR, only India-sourced income (which includes salary for services rendered in India, regardless of where paid) is taxable in India; if resident and ordinarily resident, worldwide income is taxable, subject to DTAA relief for tax paid elsewhere. Employers must obtain a PAN for the foreign national, withhold TDS under Section 192 on the India-attributable salary, and the individual typically needs to file an Indian ITR (ITR-2 or ITR-3 depending on income types) each year the assignment continues. A tax clearance certificate under Section 230 may be required before the individual permanently leaves India, depending on their specific circumstances.

A Social Security Agreement is a bilateral treaty that allows an individual on a temporary cross-border assignment to remain covered under only their home country's social security system, avoiding dual contribution, typically evidenced by a Certificate of Coverage. India has SSAs with a number of countries. The UAE does not operate a compulsory general social-insurance contribution regime for most private-sector expatriate employees in the way many SSA-partner countries do, so India-UAE assignments are usually analysed under India's domestic International Worker provisions of the Employees' Provident Fund scheme rather than through an SSA exemption mechanism. PNPC reviews the specific facts of each India-UAE assignment to confirm PF applicability rather than assuming an SSA-style exemption is available by default.

The Multilateral Instrument is an OECD/G20 BEPS Action 15 mechanism that allows countries to modify their existing bilateral tax treaties simultaneously, without renegotiating each treaty individually — implementing BEPS-related treaty changes such as the Principal Purpose Test (PPT), which denies treaty benefits where obtaining that benefit was one of the principal purposes of an arrangement. India has adopted the MLI and it modifies a number of India's DTAAs with other MLI-signatory countries. For multinational groups, this means treaty-based benefits — reduced withholding rates, capital gains exemptions, PE thresholds — that were previously available under a bilateral treaty read in isolation now need to be tested against the PPT and other MLI provisions layered on top.

The 2% Equalisation Levy on e-commerce supply or services (introduced in 2020, covering non-resident e-commerce operators) was withdrawn with effect from 1 August 2024. The original 6% Equalisation Levy on specified online advertisement services (introduced in 2016) had already been withdrawn earlier, effective 1 April 2025 for that limb, following the Finance Act amendments. Businesses should not assume either levy still applies to current-year transactions — but should also confirm whether any Significant Economic Presence (SEP) exposure under Section 9(1)(i) Explanation 2A applies instead, since SEP remains India's domestic digital-nexus rule independent of the (now-withdrawn) Equalisation Levy framework.

Significant Economic Presence, under Section 9(1)(i) Explanation 2A of the Income-tax Act, is India's domestic rule deeming a non-resident to have a 'business connection' in India (and therefore taxable income sourced in India) based on the value or volume of digital transactions with Indian users or systematic solicitation of business in India — even without any physical presence, unlike the traditional PE concept which generally requires a fixed place of business or a dependent agent physically present. SEP was introduced as India's interim domestic response pending the global consensus at the OECD on Pillar One digital taxation. Where a DTAA applies and does not itself include an SEP-equivalent nexus rule, treaty relief may still limit India's ability to tax under SEP for many non-resident digital businesses — this treaty interaction is fact-specific and needs a current review.

Increasingly, yes. IPO due diligence teams and institutional investors now routinely review a group's BEPS substance posture — whether intangible ownership, decision-making, and profit allocation across group entities is defensible and consistent with the group's own Master File and CbCR disclosures — as a distinct diligence workstream alongside financial and legal diligence. Gaps between what the CbCR shows (headcount, revenue, and profit by jurisdiction) and the group's actual operating narrative can raise diligence questions or affect valuation discussions, particularly for groups with holding entities in low-tax jurisdictions with limited substance. PNPC reviews this consistency ahead of a planned IPO or fundraise, not after a diligence question surfaces it.

The Master File (Form 3CEAA in India) provides a group-wide overview — the multinational group's business, its global value chain, intangibles, and financing arrangements — and is broadly consistent across all countries where the group operates. The Local File is entity-specific and, in Indian practice, is largely represented by the transfer pricing documentation required under Rule 10D — detailed information about the Indian entity's own related-party transactions, the benchmarking analysis performed, and the arm's length pricing conclusion. Both documents need to tell a consistent story: a Master File describing centralised decision-making at the parent level should not contradict a Local File claiming the Indian entity independently bears significant entrepreneurial risk.

The OECD/G20 Two-Pillar Solution — Pillar One reallocating a portion of taxing rights on large multinationals' profits to market jurisdictions, and Pillar Two introducing a 15% global minimum effective tax rate for large groups — is at different stages of domestic implementation across countries, with several major jurisdictions having enacted Pillar Two-style top-up tax rules while India has not yet enacted a domestic Pillar Two top-up tax regime as of the current position. An Indian subsidiary of a large group headquartered in a jurisdiction that has implemented Pillar Two rules can still be indirectly affected — the parent's global effective tax rate calculation includes the Indian entity's results, and low-taxed profit anywhere in the group (including potentially in India, depending on incentives claimed) can trigger a top-up tax liability at the parent or intermediate holding company level.

An Advance Pricing Agreement is a formal agreement between a taxpayer and the Central Board of Direct Taxes (CBDT) fixing the arm's length pricing methodology for specified international transactions in advance, for up to 5 future years (with the option of rollback to 4 preceding years). A unilateral APA involves only the Indian tax authority; a bilateral APA additionally involves the tax authority of the counterparty's home country under the DTAA's Mutual Agreement Procedure, giving relief from double taxation on the same transaction in both countries. For cross-border secondment cost recharges or management fee structures that recur year after year, a bilateral APA can materially reduce ongoing transfer pricing and mobility-related dispute risk, though the application process itself is lengthy and resource-intensive.

Yes, this scenario deserves specific attention. If a foreign company's employee works remotely from India — whether as a digital nomad, a relocated employee working for their original foreign employer, or someone who moved to India for personal reasons but kept their foreign job — the individual's salary for the days physically worked from India generally becomes India-sourced income under Section 9(1)(ii), taxable in India regardless of where the employer is based or where salary is paid, subject to DTAA relief. Separately, if the employee's role, seniority, or client-facing responsibilities in India create a fixed place through which the business is conducted, or the individual has authority to conclude contracts, the foreign employer itself can face PE exposure purely from having one remote employee working from an Indian home office over a sustained period.

A defensible file typically includes: the secondment or employment agreement clearly defining the employee's reporting line, authority, and cost allocation; a record of the employee's actual activities and travel pattern in India; evidence of whether the employee has authority to negotiate or conclude contracts on the foreign company's behalf (and if so, under what approval limits); the functional and risk analysis prepared for transfer pricing purposes, which should be internally consistent with the PE position taken; and correspondence showing whether decisions attributed to the Indian activity were actually made by, or required approval from, personnel outside India. PNPC prepares this documentation contemporaneously — at the time the arrangement is set up — rather than reconstructing it retrospectively once an assessment notice arrives.

PNPC has operating offices in Chennai, Bangalore, Hyderabad, and Dubai. For groups and individuals moving between India and the UAE — the most common corridor for our client base — our India team handles Section 6 residency analysis, Master File/CbCR compliance for the Indian constituent entity, Section 192 payroll withholding, and Indian ITR filing, while our Dubai team handles the UAE side: UAE Corporate Tax registration status of the counterparty entity (where relevant), UAE employment and visa considerations, and confirming how the India-UAE DTAA's specific articles apply to the transaction or assignment in question. Both teams work from the same file, under one engagement, rather than two firms handing off a shared client with inconsistent assumptions.

Group-level CbCR threshold assessment and Master File scoping (Form 3CEAA Part A/B). Form 3CEAC intimation filing and Form 3CEAD CbCR filing where India is the reporting jurisdiction. PE risk review for cross-border employee travel and secondment patterns. Secondment agreement drafting or review, including cost recharge structuring consistent with transfer pricing arm's-length requirements. Individual residency (Section 6/RNOR) analysis for each assignee, at assignment start and annually thereafter. DTAA tie-breaker and dependent-personal-services article analysis for each specific treaty jurisdiction. Payroll withholding design for split-year and equalised assignees. Foreign Tax Credit computation and Form 67 filing. Annual ITR preparation for assignees and foreign national employees. India-UAE specific coordination through our Dubai office for that corridor.

Fee structure depends on the nature of the engagement: CbCR/Master File compliance is typically an annual fixed fee tied to the complexity of the group structure and the number of Indian constituent entities involved. Individual mobility advisory (residency analysis, DTAA review, Form 67) is usually billed per assignee per year. Secondment structuring and PE risk review are typically project-based, given the one-time or infrequent nature of the underlying agreement drafting. For groups with multiple ongoing assignees and recurring CbCR obligations, PNPC offers a combined annual retainer covering both workstreams at an agreed fee, confirmed in writing before the engagement begins.

BEPS/CbCR filings and global mobility tax questions require current, jurisdiction-specific technical knowledge that changes frequently — Rule 10DA/10DB thresholds, MLI-modified treaty text, evolving PE case law, and residency rule interactions are not areas where a general corporate finance team maintains continuous specialist expertise, nor should they need to. The cost of getting this wrong — a missed Form 3CEAC deadline, an unplanned PE finding, a double-taxed assignee, a denied foreign tax credit claim — is typically far higher than the advisory fee for getting it right the first time. PNPC's practising CAs specialise specifically in this cross-border area and stay current on the Rules, treaty modifications, and case law that a generalist in-house team cannot reasonably be expected to track continuously.

Start with a structured review, not a filing. PNPC's first step is always to map the actual group structure, consolidated revenue, and any cross-border employee movements against the current thresholds and rules — before recommending any specific filing or restructuring. This determines whether there is a live obligation at all, whether prior years need any voluntary regularisation, and what the go-forward compliance calendar should look like. Many prospective clients approach us assuming they need an urgent CbCR filing when the group has not actually crossed the threshold, or conversely, discover a real Form 3CEAC gap only once we run the numbers.

Not automatically — a single short visit for a client meeting, a conference, or occasional oversight is generally low risk on its own. The concern arises from patterns: the same individual visiting repeatedly over successive years, an employee who begins to habitually negotiate or approve terms while in India, or a role that gradually shifts from oversight to hands-on execution during Indian visits. Indian tax authorities and tribunals look at the substance and pattern of activity over time, not just the length of any single trip. Individual short trips should still be tracked, because day-count also matters separately for the traveller's own personal tax residency position if trips become frequent.

Where an Indian-resident employee (including an assignee who has become resident during their posting) receives equity compensation — RSUs, stock options, or similar instruments — from a foreign parent company, the perquisite value on vesting or exercise is taxable in India as salary income under Section 17(2), to the extent attributable to the period of service in India. Where the individual worked partly outside India and partly in India during the vesting period, an apportionment based on the workdays in each location is generally required, and DTAA relief or foreign tax credit may apply for any tax also withheld abroad on the same equity income. Employers must factor this into Section 192 withholding at vesting, which is often overlooked when the equity plan is administered entirely by the foreign parent's payroll system with no visibility into the individual's Indian work history.

The India-UAE DTAA, like most Indian treaties, exempts an individual's employment income from tax in the host country (say, India, for a UAE-resident employee visiting on assignment) if three conditions are all met in the relevant 12-month period: the individual is present in the host country for 183 days or less; the remuneration is paid by, or on behalf of, an employer who is not a resident of the host country; and the remuneration is not borne by a permanent establishment that the employer has in the host country. If any one condition fails — the stay exceeds 183 days, the host entity becomes the paying or economic employer, or the cost is recharged to a host-country PE — the exemption is lost and the host country can tax the salary for the period worked there, subject to relief for any double taxation that results.