India – Google tax to be imposed

Google tax is a term used to refer to anti-avoidance provisions that have been passed in several jurisdictions dealing with profits or royalties that have been moved to other jurisdictions with lower or zero rates.

The Indian government has decided to tax entities that do not have permanent establishments in India but uses digital means in order to provide services in India which results in non-payment of any tax in India. Previously, business profit of a company was taxable in the country of residence.

Therefore, the government has decided to amend the Income Tax Act to stipulate that significant economic presence in India shall also be included within the meaning of the term ‘business connection’. According to the new legislation significant economic presence shall mean:

  • any transaction in respect of any goods, services or property carried out by a non-resident in India, including provision of download of data or software in India if the aggregate of payments arising from such transaction or transactions during the previous year exceeds the amount as may be prescribed; or b) systematic and continuous soliciting of its business activities or engaging in interaction with such number of users as may be prescribed, in India trough digital means.

The above mentioned threshold of revenue and the users in India will be decided at a later stage.

Until now, companies which had  no permanent establishment, has been able to avoid taxes on income earned in India. This will no longer be possible, since in the future transactions or activities shall constitute significant economic presence in India despite the non-resident has no residence or place of business in India or renders services in India.



Bildquelle: Dieter Schütz  /

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