ANNUAL STATEMENT IN FORM 49C MUST BE FILED BY FOREIGN REPRESENTATIVE OR LIAISON OFFICE IN INDIA TO INCOME TAX COMPULSORILY HENCEFORTH

Central Board of Direct Taxes (CBDT) in a recent notification has provided detailed information that foreign companies with representative or liaison offices must provide to tax authorities in accordance to a 2011 tax law amendment.

The new reporting requirements allow the government greater access to information about Liaison Offices. The highlights are;

§ The annual statement must be signed and verified by a chartered accountant or a signatory duly authorized by the Liaison Office parent

§ The annual statement must be provided via an electronic form with a digital signature

§ The following information that must be provided:

§ All details for the financial year that relate to India. This includes receipts, income and expenses of the nonresident from or in India (this is not information related to the Liaison Office only);

§ Details of all purchases, sales of materials and services from or to Indian parties during the year by the nonresident parent (not just transactions entered into by the Liaison Office);

§ Salary or compensation details where the salary or compensation is paid or is payable outside India to any employee working in India or for services rendered in India;

§ Total count of employees working at the Liaison Office for the current year

§ Complete details about the representatives, distributors and agents of the nonresident parent in India and details of the top five parties in India with whom the Liaison Office has liaised;

§ Complete information about the product or service for which research or preparatory activity is carried out by the Liaison Office along with details of any other entity for which liaising activity is carried out by the Liaison Office;

§ Information about group entities that maybe present in India e.g. branch office, company, limited liability partnership, etc., established in India

§ Details of other Liaison Offices of group entities in India; and

§ Information regarding other group entities operating from the same premises as the office of the Liaison Office.

Non-resident companies with Liaison Offices in India must file an annual statement. The latest CBDT notification provides details on the specific form for the statement (Form No. 49C) and the rules that are effective since April 1, 2012.

[Income tax Rule for Furnishing of Annual Statement by a non-resident having Liaison Office in India.

114DA.

(1) The annual statement as provided under section 285 for every financial year, shall be furnished in Form No. 49C.

(2) The annual statement referred to in sub-rule (1) shall be duly verified by the Chartered Accountant or the person authorized in this behalf by the non-resident person, who shall be known as the Authorized Signatory.

(3) The annual statement referred to in sub-rule (1) shall be furnished in electronic form along with digital signature.

(4) The Director General of Income-tax (Systems) shall specify the procedure for filing of annual statement referred to in sub-rule (1) and shall also be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to statements so furnished.

Extension of Deadline for the year 2011-2012

The Income tax authority of India has extended the due date for filing 49C form for particular categories of assessees having a Liaison Office in India. On account of technical difficulties in providing appropriate facility for electronic filing, the due date has been extended up to September 30, 2012, for the financial year 2011-12.

 

Formerly, the assessees were directed to file Form 49C electronically, within 60 days from the end of financial year. However to ensure compliance, Indian tax authorities have allowed assessees to file Form 49C in ‘paper mode’ instead of filing it electronically. The Form 49C (Paper Mode) should be sent to the following address by 'Registered Post' or 'Speed Post':

 

The Director General of Income Tax (International Taxation),

4th Floor, Drum Shaped Building,

I.P. Estate, New Delhi-11002.

This annual statement must be submitted within 60 days from the close of the Liaison Office’s financial year.

These reporting requirements are in addition to a separate guideline that requires a Liaison Office to submit an Annual Activity Certificate to the designated authorized bank in India with a copy to jurisdictional Directorate General of Income Tax under FEMA.