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No PE Certificate

What is a No PE certificate ?

No PE Certificate is a certificate given by a non resident, who is deriving any income from India (which could be interest, Fee for Technical Services, Business Income etc., ) , which enables the Indian payor, to with hold tax at a lower rate applicable to a particular income.
Generally, if a non resident derives business income from India, and also has a Permanent Establishment in India,  taxes are to be withheld  @ 40% of net income of the non resident (plus applicable surcharge and cess). In the absence of details of Expenditure related to the income earned from India, such payments may be liable to tax @ 40% of  gross payments, unless the non-resident obtain a lower withholding tax certificate from the Income Tax Department.
No PE Certificate for income taxable at lower rates on a gross basis
However, certain payment in the nature of fee for Technical Services, royalties, interest etc are taxable at a lower rate of 10-15% of the gross payment. This benefit however is available only when non resident does not have a PE in India. Therefore in such a case, no PE Certificate is required to be obtained by the Indian payor, to apply the lower gross rate of tax applicable to such payments.
No PE Certificate for business income 

Similarly, in case the non resident does not have a permanent establishment in India, the business profits would not be liable to tax in India.  In such cases as well,  no PE Certificate is required to be obtained by the Indian payor, to apply  Nil rate of tax applicable to such payments.

The format of the No PE Certificate is as under : –

DRAFT FORMAT OF THE NO PE CERTIFICATE

DATE

Name of the Indian party

Address <<<>>>>,

<<>>>>> 

Indian

Dear Sirs,

We refer to the consideration payable to us under the “<<<<<<>>>> Agreement” for <<<<>>>>>>. In this connection , we do hereby confirm as under:

We are a company incorporated under the laws of the <<<>>>> and having our  principal office at <<<<<<<<<>>>>> . We are a tax resident of <<<<>>>> under our domestic tax laws with the Tax Identification Number <<<>>>>.

We qualify as tax resident of <<<<>>>>> in terms of the India and <<<<>>>> Tax Treaty for the avoidance of double taxation (“Tax Treaty”) and do not qualify as a “resident” of India under Section 6 of the (Indian) Income Tax Act, 1961. We are, therefore, eligible to invoke the beneficial provisions of the Tax Treaty in respect of any income derived from India for the period <<<<<<<<<<>>>>>>>>>>.

We do not have  a PE in India in terms of Article 5 (<<>>) of the India – <<>>> Tax Treaty. In this regard:

  • We do not have any office or other fixed place of business in India as envisaged in Article 5 of the Tax Treaty.
  • We do not have any dependent agent performing activities in India as envisaged in Article 5(<<>>> ) of the Tax Treaty which may constitute a dependent agency  Permanent            Establishment for us in India in terms thereof.

EXPLORE OUR  DTAA/ TREATY INTERPRETATION COURSE – ARTICLE BY ARTICLE ANALYSIS

In view of the above, we certify that we qualify as a tax resident of the <<<>>> and do not have a ‘Permanent Establishment’ in India under the provisions of Tax Treaty for the period <<<<<<<<<>>>>>>>.

We are the beneficial owner of the consideration receivable under the Agreement mentioned above.

In the event of any change in the above position, we will inform you in writing.

For Name of the Company

Name of person signing

 

Designation of the Person signing

 

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