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CONVINUS Global Mobility Alert Week 24.2022

India / June 16, 2022

India / June 16, 2022 "Service tax" for secondments to India Companies are called upon to reconsider their handling of the passing on of costs in the case of an assignment to India as well as their assignment regulations. The Supreme Court of India has recently ruled that a "service tax" is payable on assignments to India. The case concerned an Indian subsidiary that received employees on secondment from the parent company, which is located outside India. The seconded employee remained employed by the headquarter during the secondment and was also paid by the headquarter. A service contract existed between the parent company and the Indian subsidiary. The Indian subsidiary had the right to issue instructions to the seconded employee. In the past, such a constellation was judged by the Indian courts to be viewed as an assignment of employees, with the Indian company entering into an employee-employer relationship. In this latest judgment, the Supreme Court has now ruled that it would rather be a personnel leasing constellation and that the "service tax" would have to be paid accordingly. For this reason, it is advisable to review and adapt the existing regulations to avoid the risk of "service tax". Indien / 16. Juni 2022 “Service tax” bei Enstendungen nach Indien Unternehmen sind gefordert ihre Handhabung bezüglich der Weiterbelastung von Kosten sowie die Entsendungsregeln bei einer Entsendung nach Indien zu überdenken. Das oberste Gericht in Indien hat in einem kürzlich ergangenen Urteil festgehalten, dass eine «Service tax» bei Entsendungen nach Indien zu entrichten ist. In dem zu beurteilenden Sachverhalt ging es um eine indische Tochtergesellschaft, welches vom Konzern-Mutterhaus, welches sich ausserhalb von Indien befindet, Mitarbeiter entsandt, erhalten hat. Der Entsandte blieb während der Entsendung weiterhin beim Konzern-Mutterhaus angestellt und wurde auch von diesem entlöhnt. Zwischen dem Konzern-Mutterhaus und der indischen Tochtergesellschaft bestand ein Dienstleistungsvertrag. Die indische Tochtergesellschaft hatte das Weisungsrecht gegenüber dem Entsandten. In der Vergangenheit wurde eine solche Konstellation als Arbeitnehmerentsendung von den indischen Gerichten beurteilt, mit dem, dass die indische Gesellschaft in eine Arbeitnehmer-Arbeitgeberbeziehung eingegangen ist. In diesem jüngst ergangenen Urteil hält das oberste Gericht nun fest, dass es sich vielmehr um eine Personalverleihkonstellation handeln würde und dem entsprechend, die «Service tax» abgeführt werden müsste. Aus diesem Grund ist es empfehlenswert die bestehenden Regelungen zu überprüfen und anzupassen, um das Risiko der «Service tax» zu vermeiden. 6

June 16, 2022 Global Mobility: Is there a simple solution for the payroll accounting of expatriates? Unfortunately, the question cannot be answered with a simple "yes" or "no". Nor is there just one solution that can be applied to all assignments. The following is a description of one situation as an example. Often two payrolls must be kept for posted workers during the posting, namely one in the home country and one in the country of assignment. The reason for this is that the assignee usually remains insured in the home country whenever possible and therefore a payroll must be kept in the home country for the settlement of social security contributions. In the country of assignment, however, the assignee is usually liable to pay taxes, unless it is a short-term assignment. Consequently, payroll must be carried out in the country of assignment for the payment of taxes. Furthermore, it must be determined in which country the assignee wishes to receive the salary payment. In some cases, assignees receive salary payments in both the home country and the country of assignment. There can be many reasons for this. On the one hand, the assignee often still has financial obligations in the home country (e.g. home ownership, family stays in the home country, insurance), but on the other hand, his center of life is now in the country of assignment. High exchange rate fluctuations or the problem that in some countries you cannot simply transfer the money back to another country can also play a role. Since both payrolls (in the home country and the country of assignment) have to be coordinated with each other, regardless of whether salary payments are paid in both countries or not, this is usually a very time-consuming process for the payroll departments, which cannot be described as a simple solution. 7

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