Question 1: Fiscal Domicile in Double Taxation:

1. Fiscal domicile test

– A foreign national of the UK has resided in India for more than 180 days,
and sent to India to set up a company. In such a case, what preliminary
questions u should ask to determine if he is a resident of India or UK?
– Give concept of fiscal domicile
– And how the concept is critical
– Concept under DTAA - give the concept - 2 marks, along with it give 2 3
critical examples, why this concept of fiscal domicile imp and why does it
has a place in international treaty, importance from the perspective of int
tax treaty, example as to how it helps if a person is resident of both
countries, how the place of vital importance is determined and give
example.
– How foreign expatriates and nationals etc come to india, and foreign
companies usually want one of their person in the country, then how
citizency is established
– 10 marks question then - 10 pointers - 10 points to determine tax residency
– If tax residency is triggered, then the persons global income will also be
taxed in india
o you are a lawyer of a foreign expat who has come to India- what are the
triggering points you as a counsel should ask: what questions will you ask to
know if the person is a tax resident of India?

Answer 1: Things that need to be studied

As a lawyer what would you do?
What are the documents you would attach?
Can even do it in annexure form

Things that need to be studied

(1) What is fiscal domicile- Its relevance
a. Section 15cb analysis for this test
(2) Tie-breaker rule- Its relevance and how is it resolved

Centre of vital interest

Social
Cultural
Financial
Home
 Place of habitual abort –
o Is the house in London and Mumbai rented or your own?
o How many days in both the days stayed at?
o What are your major festivals?
  Where were you during the time of these festivals- if celebrated in India mostly,
you’ll get to know that social circle mainly in India
 Bank accounts that are in London and how many are in India?
 Where are you getting the major income from? – can say that 50% to London bank
account and 50% in India
o You have to find the tie-breaker rule
 Where are your major investments like FDs, and land?
o Can answer that FDs in London, you own a house in London even though you
live in a rented one
 Social and cultural is in India even though finance is in London- India still gets
weightage over London

Answer
Fiscal domicile test
• A foreign national has resided in india for more than 180 days, qualifying the
residency test of UK also, in such a case, prelimainary questions u should ask to determine if
he is a resident of india or UK
• Give concept of fiscal domicile
• And how the concept is critical
• Concept under DTAA - give the concept - 2 marks, along with it give 2 3 critical
examples, why this concept of fiscal domicile imp and why does it have a place in
international treaty, importance from the perspective of int tax treaty, example as to how it
helps if a person is resident of both countries, how the place of vital importance is determined
and give example.
• How foreign expatriates and nationals etc come to india, and foreign companies
usually want one of their person in the country, then how citizency is establsihed
• 10 marks question then - 10 pointers - 10 points to determine tax residency
• If tax residency is triggered, then the persons global income will aslo be taxed in
india.
• Relevance of fiscal domicile
• Tie breaker rule
• Concept of tie breaker
• And how tie breaker is to be resolved

• What is DTAA?
• A bilateral agreement between two countries to avoid taxing the same
income twice. These agreements play a crucial role in mitigating the fiscal challenges posed
by dual taxation, ensuring that taxpayers are not unduly burdened by the overlapping tax
claims of different jurisdictions.
• Beneficial for non-residents earning income in India or Indians earning
income abroad.
• India has DTAAs with over 90 countries including:
○ USA, China, Australia, etc.
 Without DTAA:
• The same income may be taxed in:
○ Source country (where income arises)
○ Residence country (where the taxpayer resides)
With DTAA:
• Either exemption (only one country taxes) or credit method (tax paid in one
is credited in the other).
• It provides lower tax rates or tax relief under specific heads (royalty, interest,
capital gains).

Before advising a client or claiming DTAA benefits, ask:

1. Are they a resident or non-resident?
→ Based on Section 6 of the Income Tax Act (number of days stay in India).
2. Do they have a Tax Residency Certificate (TRC) from the foreign country?
→ Mandatory for DTAA benefits.
3. Have they filled Form 10F?
→ A self-declaration by the non-resident including:
○ Nationality
○ Tax Identification Number (TIN)
○ Residential status
○ DTAA article under which relief is claimed
4. Nature of income?
→ Whether it's:
○ Royalty
○ Fees for technical services
○ Capital gains
○ Business income
→ Because different articles under DTAA apply.
5. Where is the income sourced and where is residence?
→ To determine primary taxing right and whether relief is available.
•
• Tie breaker rule under DTAA
What is it?
• When a person is treated as a resident in both countries, the tie-breaker test
helps determine the true country of residence for taxation.
Sequential Tests (OECD Model):

1. Permanent home available → in which country?

2. Centre of vital interests → personal and economic relations - social,
cultural, economical, home, income, god,
In every area you have to break the tie, and have to see where the weightage is
more in which geography. The key factors in assessing the centre of vital interests are:
 ○ Place of habitual abode - Number of days stayed in the habitual
abode.
○ Where is your family situated, where are your friends, where are you
attend social gatherings etc.
○ Major festivals and social activities concentrated in which state
○ Bank accounts - how many in which country, from where are u
getting your major income,
□ 2 situations - income is equally distributed in both accounts,
then u will look at major investments - FDs, property - land, own a house,
○ If you own a house in india, but rent a house in london then doesn’t
mean london will be given less importance, depends on where you spend more time.

3. Nationality- family ties

4. Property, festivals celebrated, bank accounts held
5. Mutual agreement between the two countries' tax authorities
Example: A person with homes in both India and the US—wherever he has
stronger personal/economic ties will be considered the tax resident.

• Form 10 F - DTAA compliance document

• Purpose:
• Filed by non-residents to declare details for availing DTAA benefits.
• What it includes:
• Name and nationality
• Status (individual/company/etc.)
• Country of residence
• Tax Identification Number (TIN)
• Address in the resident country
• Period of income for which DTAA relief is claimed

Question 2:
1. DTAA- what is ‘fees for technical services’?
2. What is the meaning of royalty?- How does it affect the taxing rights
3. Tax residency certificate- Why is it important while doing tax analysis
4. If DTAA has a provision for FTS, and makes available clause then how does it
affect the taxing right of the country:
a. India Australia, India-UK, India-China

Answer 2:

2. Fees for technical services under DTAA, make available clause under DTAA,
menaing of royalty, if any DTAA has provision for 'make available' then how does it affect
the taxing rights of india, give example, study india - australia, india - china, india -
singapore.
 • Tax residency certificate's importance, and importance of it while doing treaty
analysis.

Taxability under the Indian Tax Laws:-

As per Section 5 of the Income Tax Act 1961 ("the Act"), a non-resident is taxable in
India in respect of the following:

1. Income received or deemed to be received in India; or

2. Income which accrues or arises or is deemed to accrue or arise in India.

As per provisions of section 9(1)(vii) of the Act, any income by way of fees for
technical services (‘FTS’) payable by a resident of India to a non-resident shall be deemed to
accrue or arise in India.

Explanation 2 to section 9(1)(vii) of the Act defines FTS as:

“…“fees for technical services” means any consideration (including any lump sum
consideration) for the rendering of any managerial, technical or consultancy services
(including the provision of services of technical or other personnel) but does not include
consideration for any construction, assembly, mining or like project undertaken by the
recipient or consideration which would be income of the recipient chargeable under the head
“Salaries”.

In the instant case, services to be rendered by Mr. Kevin may primarily be in the
nature of consultancy services and technical services. Hence, the same would fall under the
definition of FTS under section 9(1)(vii) of the Act. Therefore, income received by Mr.
Kevin on account of these services will be taxable in India as per the provisions of the Act.

In the absence of a Permanent Establishment ("PE") in India, income in the nature of

FTS received by Mr. Kevin would fall under the purview of section 115A of the Act. As per
the Indian Income Tax Act, the rate of withholding tax for FTS is 20% plus Education cess
and surcharge. on gross basis.

Taxability under the India-UK Double Tax Avoidance Agreement (“DTAA”):-

1. Mr. Kevin, being a non-resident of India and resident of UK, has the option to be
taxed under the Act or the DTAA, whichever is more beneficial as per section 90(2) of the
Act.

2. Mr. Kevin may not form a PE in India as per Article 5 of the India-UK DTAA.
 3. Article 13(4) of the India-UK DTAA provides for taxability of FTS if the services
‘make available’technical knowledge, experience, skill know-how or processes, to the
recipient of the services. We understand that the services rendered by Mr. Kevin may not
make available technical knowledge, experience, skill know-how or processes to Linfox
Logistics (India) Pvt Ltd and it may not be taxable as FTS under India-UK DTAA. The
services would be considered as ‘make available’ when a person receiving the services is able
to execute the said services independently without further assistance of the service provider.

CIT & ITO v. De Beers India Minerals (P) Ltd [2012] 72 DTR 82 (Karnataka);

DIT v. Guy Carpenter & Co. Ltd [2012] 346 ITR 504 (Delhi)

4. Accordingly, it could be concluded that income to Mr. Kevin on account of

rendering of the consultancy services to Linfox Logistics (India) Pvt Ltd may not be taxable
in India (taking the benefit of DTAA) subject to fulfilment of Rule 37BC of the Income Tax
Rules, 1961 (“the Rules”) .

Relaxation from deduction of tax at higher rate under section 206AA of the Act

Rule 37BC of the Rules, provides that the provisions of section 206AA of the Act
shall not apply on following payments made to non-residents deductees who do not have
PAN in India:
1. Payment in the nature of Interest;
2. Payment in the nature of Royalty;
3. Payment in the nature of Fees for technical services and
4. Payments on transfer of any capital asset.

However, the non-resident deductees need to furnish the following details and
documents to the deductor, namely

1. Name, e-mail id, contact number;

2. Address in the country of residence;
3. Tax Residence Certificate (if the law of the country of the residence provides for
such a Certificate; and
4. Tax Identification Number (“TIN”) of the country of residence. Where TIN is
not available, Unique Identification Number is required to be furnished through which the
deductee is identified in the country of residence.

As a precondition for claiming treaty benefits, domestic law requires non-residents to

furnish a certificate establishing that they are a tax resident (a tax residency certificate, or
TRC) of the relevant treaty country. The person is also required to provide details regarding
their status, nationality, tax identification number, and address, and the period for which
residential status applies, if that information is not already contained in the TRC. The
information is required to be given in Form 10F, prescribed by the Indian tax authorities.

Documents Required to Avail the Benefits of the India-UK DTAA:

a. Service Agreement; b. Invoice; c. Tax Residency Certificate; d. Copy of the

Passport (Self Attested); e. Copy of the Visa (Self-Attested); [Link] 10F
It may be advisable for non-resident taxpayers who have income from sources in
India and who wish to seek benefit from tax treaties to obtain a TRC and furnish Form 10F
electronically, as required under the domestic laws of India. This will avoid the withholding
of taxes at higher rates under the domestic laws and elaborate compliance procedures and/or
litigation in India. Where, for any reason, it is not possible to do so, the onus would be on the
taxpayer to sufficiently demonstrate to the satisfaction of the tax authorities that they are
entitled to the treaty benefits.

From October 1 2023, the Income Tax Department portal has been modified to allow
non-residents without a PAN to furnish Form 10F electronically.

206 AA wont be applicable for royalty payments etc, otherwise it will apply

3. What is tax residency certificate and why is it important ?

• Format:
• Explain the Facts of the Case
• Explain a provision of DTAA (Choose of Particular Nature of Income)
• Explain the Provisions of the Income Tax Act (For the said Nature of Income)
• Explain the provisions of Section 90(2) of the Income Tax Act, 1961
• Form 15CB
• Documents
• Emphasis of TRC to get Tax Treaty Benefits

4. FTA, FTP, and DTAA interplay

• Explain the purpose of FTA, FTP, and DTAA, and the interplay between them.
• FTP - Need intervention of cutom authorities
• FTA - signed by commerce ministry, benefits given by commerce and indutry ministry
• DTAA - under ministry of finance
• What impact these bring to india? FTP guidelines by press trust of india
• How does FTA help india
• Why do countries have DTAA, how do they help?
• FTP is an offspring of the new changes. - economic figures are needed
• One segment on customs, anti - dumping, safeguard duty, MOOWR scheme