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Consultancy technology transfer   tax perspective
Consultancy technology transfer   tax perspective
Consultancy technology transfer   tax perspective
Consultancy technology transfer   tax perspective
Consultancy technology transfer   tax perspective
Consultancy technology transfer   tax perspective
Consultancy technology transfer   tax perspective
Consultancy technology transfer   tax perspective
Consultancy technology transfer   tax perspective
Consultancy technology transfer   tax perspective
Consultancy technology transfer   tax perspective
Consultancy technology transfer   tax perspective
Consultancy technology transfer   tax perspective
Consultancy technology transfer   tax perspective
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Consultancy technology transfer tax perspective

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  • 1. CONSULTANCY & TECHNOLOGY TRANSFER: TAX PERSPECTIVE DHANYA N. MENON ALTACIT GLOBAL http://www.dvd-ppt-slideshow.com
  • 2. WHAT IS TECHNOLOGY TRANSFER? <ul><li>process of sharing of skills, knowledge, technologies, methods of manufacturing, samples of manufacturing and facilities </li></ul><ul><li>among governments and other institutions </li></ul><ul><li>to ensure that scientific and technological developments are accessible to a wider range of users </li></ul><ul><li>who can then further develop and exploit the technology into new products, processes, applications, materials or services </li></ul>
  • 3. FUNCTION <ul><li>Coordinate </li></ul><ul><li>Nurture </li></ul><ul><li>Link </li></ul>
  • 4. INCLUDES : <ul><li>processing and evaluating invention disclosures </li></ul><ul><li>technology marketing </li></ul><ul><li>Licensing </li></ul><ul><li>protecting intellectual property arising from research activity </li></ul><ul><li>assisting in creating new businesses </li></ul>
  • 5. <ul><li>Tax issues arise in International Technology Transfer (ITT) </li></ul><ul><li>Three major players: </li></ul><ul><li>- Home Country: Technology Exporting </li></ul><ul><li>Country </li></ul><ul><li>- Host Country: Technology Importing </li></ul><ul><li>Country </li></ul><ul><li>- Multi National Companies </li></ul>TAX ISSUES
  • 6. MULTINATIONAL FIRMS, TAXATION &amp; TT <ul><li>Methods of providing new technologies to the country in which they invest: </li></ul><ul><li>1. developing new technologies locally </li></ul><ul><li>2. Import technology </li></ul><ul><li>The R &amp; D expenditure is liable to tax with some deductions </li></ul><ul><li>Income arising to non-residents (including foreign companies), directly or indirectly from a business connection, from any property in India, or transfer of a capital asset situated in India, would be subject to tax in India. </li></ul>
  • 7. TAX POLICIES AND TT <ul><li>Affects: </li></ul><ul><li>1. Increases the cost of actual transfer </li></ul><ul><li>2. reduces the subsequent return to the transferor </li></ul><ul><li>Falls under: </li></ul><ul><li>business profits, </li></ul><ul><li>fees for services, </li></ul><ul><li>rents and royalties, </li></ul><ul><li>dividends and capital gains, and </li></ul><ul><li>employees’ salaries </li></ul>
  • 8. <ul><li>Royalty: consideration for transfer of rights in respect of or for use of intellectual property </li></ul><ul><li>Taxable in the hands of non-residents if the same are received in or accrued in India. </li></ul><ul><li>Fees for technical services: any consideration for the rendering of any managerial, technical or consultancy services </li></ul><ul><li>Taxable in the hand  of non-residents if the same is received in India or it accrues in India. </li></ul><ul><li>Payment of royalty abroad for use of a trademark in India will result in taxes in India </li></ul>
  • 9. <ul><li>all incomes accruing or arising, whether directly or indirectly, through the transfer of a capital asset situated in India is liable to Income-tax. </li></ul><ul><li>intangible assets like trademarks, brand-names etc shall be taken as located in India if they are used in India. </li></ul><ul><li>Their place of registration in this context is not material . </li></ul>
  • 10. NOTIFICATION 18/2002 – SERVICE TAX <ul><li>taxable services provided by a consulting engineer to a client on transfer of technology are exempted from service tax to the extent of the amount of cess paid on the said transfer of technology </li></ul>
  • 11. <ul><li>The Service Tax is leviable only on the taxable services supplied within India </li></ul><ul><li>taxable services exported outside India are not leviable to service tax and therefore, exempt. </li></ul><ul><li>a Management Consultant or a Consulting Engineer provides the consultancy service to a foreign company situated outside India, it will constitute direct export. </li></ul>
  • 12. <ul><li>Indian Farmers Fertilizer Co-Operative Ltd. vs </li></ul><ul><li>Commissioner Of Central Excise on 26/12/2006 </li></ul><ul><li>IFFO obtained license to use of Topsoe’s technology for </li></ul><ul><li>redesigning and modifying the operation of its ammonia </li></ul><ul><li>and urea plants at U.P. to make the plants more energy </li></ul><ul><li>efficient- tax payable in India-transaction was one for </li></ul><ul><li>transfer of know-how/intellectual property which could </li></ul><ul><li>be sold or licensed and not a service-purchase of </li></ul><ul><li>imported goods-technical assistance was incidental </li></ul><ul><li>Contented: technical assistance was meant to be provided </li></ul><ul><li>at the plants situated in India-transfer of know –technical </li></ul><ul><li>assistance was not subsumed within the know-how </li></ul>
  • 13. <ul><li>Neither was the transaction completely one for transfer of know-how nor was it entirely for provision of services. It was for both; also, the agreements envisaged two separate methods of payment for each of the components. Therefore, since only a portion of the outstanding tax liability of Rs.14.5 lakhs was for technical assistance, only such portion could be recovered from IFFCO. </li></ul>
  • 14. &nbsp;

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