Tax Residency Certificate or TRC is a important document in International Taxation

Many times when an Indian Business makes payments to Non Residents, the Rate of TDS are different if they produce TRC.

So, What is this TRC ?

Q– How long is a Tax Residency Certificate valid for?

The validity period of a TRC varies depending on the country issuing it and the specific terms of the certificate. Some TRCs are valid for one year, while others may have longer validity periods.

Q– Can a Tax Residency Certificate be renewed?

Yes, in most cases, TRCs can be renewed by submitting updated documentation and meeting the renewal requirements set by the tax authorities.

---

Q– Can I use a Tax Residency Certificate in all countries?

TRCs are specific to the country that issues them and are generally used to claim tax treaty benefits between that country and other countries with which it has a tax treaty.

What is the validity of the TRC certificate in India?

 

In India, TRC certificates are valid till the end of the financial year from its date of issue.

source :

https://cleartax.in/s/tax-residency-certificate#

Is TRC mandatory for claiming DTAA benefit ?

As per Section 90(4), taxpayers must furnish their tax residency certificates along with the relevant information in Form 10F in order to claim DTAA benefits.

See first source : https://arlettipartners.com/tax-residency-certificate-italy/ … its extract as under

Question : How long does the tax residence certificate last?

The tax residence certificate can be obtained upon request and usually relates only to the relevant tax year shown on the certificate itself.

and also, ……When the tax residence certificate must be presented to a foreign authority, it may be needed to legalize it for use in that country. …….. this is similar to the electronic self declaration, Form 10F in India

====================

Is TRC Compulsory ?

============

As per FAQ and Tutorials on Income Tax Department, Govt of India, site : https://incometaxindia.gov.in/Tutorials/64.Double-Taxation-Relief.pdf  See Question number 4

 

Q4. A non-resident, to whom a DTAA applies, shall be entitled to claim any relief under such DTAA only if he obtains a ____?______ of his being a resident of any foreign country from the government of such country.

(a) Tax Residency Certificate (TRC)

(b) Taxpayer Identification Number (TIN)

(c) Both (a) and (b)

(d) None of the above

Correct answer: (a)

Explanation : A non-resident, to whom a DTAA applies, shall be entitled to claim any relief under such DTAA only if he obtains a Tax Residency Certificate (TRC) of his being a resident of any foreign country from the government of such country. Further, he shall be required to furnish some additional information in Form No. 10F electronically.

The above is the Official Explanation to this Question by the Government

This proves beyond doubt that the valid TRC is compulsory

10F is apart from and additional to the TRC

---

Other related Points

The Tax Residency Certificate (TRC) is a critical document for Non-Resident Indians (NRIs) as well as Other Non Residents, aiming to handle their tax duties efficiently. Understanding its ins and outs and how to obtain it is crucial for NRIs navigating the complex world of international taxation. In this article, we’ll delve into the intricacies of TRC, its significance for NRIs, and the steps to obtain it.

---

Purpose of Tax Residency Certificate

The primary aim of a Tax Residency Certificate is to prevent double taxation for individuals living in one country but earning income in another. It serves as proof of tax residency status and allows NRIs to claim tax benefits under Double Taxation Avoidance Agreements (DTAA) between countries.

Eligibility Criteria for NRIs

To qualify for a TRC, individuals must meet the criteria of being Non-Resident Indians (NRIs). An NRI is someone who is an Indian citizen or of Indian origin residing outside India for employment, business, or other purposes, or staying abroad with uncertain duration of stay.

Application Process for TRC

The application process involves submitting specific documents and forms to designated authorities. These documents typically include proof of identity, address, and tax payments. NRIs can apply for a TRC at designated offices or through online portals, depending on country regulations.

Timeline for TRC Issuance

The duration to obtain a Tax Residency Certificate varies based on the country and the efficiency of issuing authorities. Factors like application volume and documentation completeness can affect processing time. NRIs should consider enough time for the application process when planning their tax affairs.

Importance of TRC for Non Residents

TRC is crucial for Non Residents as it validates their residency status in a particular country. It allows them to take advantage of tax benefits, prevent double taxation, and ensure compliance with tax regulations in their country of residence and in India.

Many times when an Indian Business makes payments to Non Residents. The Rate of TDS are different if they produce TRC. What is this ?

in the service of the MSME’s In India. Contact us page click here

Want to be systematic ? Want to reduce Wastages ? Want to prevent Leakages ?

Want to do Preventive Action plan

How to Account for Petty Expenses in the Company Pantry Washroom Repairs

[Academic discussion only]

These are the Steps recommended for

Method 1 : / Part 1 : Very small purchases, with following trigger points

Category 1

No minimum stock required,

infact no stock to be kept. either fully consumed, or purchased only exact qty, or left over is disposed off, like paint for your office /factory . The balance wet paint is discarded . Stock kept might be nil usually.

No Rate history required

No accountability required

Example

1. Staff car accidental repair.. spare parts
2. Office washroom taps repairs ( plumber )
3. Garden maintenance
4. Carpenter repair
5. Building repair – civil – Bricks, stone dust etc
6. Building whitewash. / paint
7. Office snacks, samosa, sweets, perishable ( Note Kitchen and pantry items = regular is excluded,.. it should be controlled if desired )

Ideal solution is

If expense is made before the rate is finalised

And po is only a formality

Then the solution is

Get proper invoice, if available ,if possible

Pass the accounts voucher in books via a special route. “ 5A”

Do TDS, as per rules =OK

Take ITC of GST as per rules, if available. = OK

No PR required = ok

No PR Approval required = ok

No PO required = ok

No PO Approval required = ok

No Gate Entry

No MRR required = Ok

No QC required= OK

Put all the items , even if 100 items in that invoice.. into single HS code,

Since not material for the company as a whole

TDS will be automatic, in Finsys based on the TDS section/Rate to the vendor master

Category 2 items

Here the trigger points are

Stock required = yes

Rate history required = yes

Consumption Accountability required

But they are not the production items

Example

1. All production C class items
2. All electrical repair
3. All machine repair
4. If material + can be standardised
   1. Tube light
   2. LED lights
   3. Machine oils
   4. QC lab items
   5. Kitchen regular items

5. Full year long term contract, organised super market. Dept store… with proper PO, proper credit terms, free office delivery, weekly or monthly schedule
6. So benefit
   1. Proper Po, Proper all things like a normal raw material
   2. Proper po vs actual MRR
   3. Price control
   4. Consumption control

====

Materiality for bill :

1. 1. Above Rs 5000, bill is highly recommended
   2. 1000 to 5000 ok
   3. Below 1000 = you decide, ideally required, but can allow in case it is practically not possible. Even a paper slip can be approved by the sanctioning authority if situation so demands example autorickshaw charge of Rs 200, or Metro coupon of Rs 24, or a Water bottle of Rs 20, or a Tea of Rs 10

Contact us

So, this was the academic discussion and suggested SOP’s for a Small / Medium Pvt Ltd company, especially in the home grown MSME sector.

EPS in AS-20, how to implement in MSME balance sheets

Practical aspect in case of Bonus Shares

Since in

Reference : MCA website :  https://www.mca.gov.in/Ministry/notification/pdf/AS_20.pdf

Para 24 of the AS-20 clearly says

Equalisation Levy 2020 E commerce Service Provider 2 percent cases

However, as of April 1, 2020, the Indian government has extended the scope of the equalization levy. The Finance Act, 2020, introduced a new provision – Section 165A – which mandates that non-resident e-commerce operators providing e-commerce supplies or services to Indian residents must remit an equalization levy.

This levy, set at a rate of two percent, is calculated based on the consideration received or expected from e-commerce supplies or services facilitated, provided, or delivered by the said operator.

But Note : This EL is NOT on the Indian Customer ( payer of money… ) 

BUT…. it is on the non resident Ecom operator

Non-Resident E-commerce Operators required to make compliances in India

Source 1 :https://www.india-briefing.com/news/equalization-levy-compliance-framework-for-non-resident-e-commerce-operators-in-india-29238.html/ 

Source 2 : https://www.rsm.global/india/sites/default/files/media/News%20Articles/2020/Aug%202020/4_tax_publishers_-_rsm_india_-_7_august_2020.pdf

Source 3 : https://icmai.in/TaxationPortal/upload/DT/Article/118_0811_23.pdf

Now, the equalization levy encompasses e-commerce transactions involving the sale of goods and services by non-resident operators to Indian customers. This levy stands at two percent and is imposed on the consideration received or expected by these non-resident e-commerce operators. This change showcases the government’s endeavor to adapt taxation norms to the evolving landscape of digital business operations.

In essence, the equalization levy represents a taxation mechanism applicable to:

(a) Designated services, as established by the Finance Act of 2016; and

(b) E-commerce supplies or services, as delineated under the Finance Act of 2020.

The term ‘e-commerce supply or services’ encompasses the following activities:

• Online retailing of goods owned by the e-commerce operator; or
• Online delivery of services by the e-commerce operator; or
• Assisting in the online retailing of goods or provision of services, or both, by the e-commerce operator; or
• Any combination of the aforementioned activities.

Exceptions and exemptions

The equalization levy does not come into play under the following circumstances:

• The e-commerce operator maintains a Permanent Establishment (PE) in India, and the e-commerce supply or services is directly linked to this PE.
• The consideration received has already undergone the six percent equalization levy due to engagement in online advertising and related functions.
• The e-commerce operator’s sales, turnover, or gross receipts from the e-commerce supply or services, whether made, provided, or facilitated, remain below INR 20 million for the fiscal year.

Income tax relief

Starting April 1, 2021, amendments to the income tax regulations introduce an exemption for income generated by an e-commerce operator already subject to the equalization levy. See Section 10(50)

Means : if the E commerce operator has paid the EL , then no need of income tax ??? to discuss.

Compliance obligations for the equalization levy on non-resident e-commerce operators

To fulfill the compliance requirements for the equalization levy, certain crucial deadlines and actions need to be adhered to by non-resident e-commerce operators. Specifically:

• Annual statement filing deadline: An essential task entails filing an annual statement within the timeframe of April 1 to March 31, with the submission deadline set on June 30 of the corresponding financial year. This procedure is imperative for maintaining compliance.
• Late payment implications: Timely payment of the equalization levy is paramount. Failure to meet the stipulated payment deadline invites the imposition of simple interest at a monthly rate of 1% on any overdue amounts. Additionally, a non-resident e-commerce operator that neglects to pay the levy faces a penalty equal to the levy’s amount, amplifying the importance of adhering to the payment timeline.
• Penalties for non-filed annual statements: Non-compliance with the requirement to file the annual statement carries its own set of consequences. An additional penalty of INR 100 per day is enforced for each day of non-compliance, calculated for the period during which the default persists.
• Role of Permanent Account Number (PAN): In the process of fulfilling the aforementioned obligations, non-resident e-commerce operators would necessitate a Permanent Account Number (PAN). This requirement is crucial for further progress, despite not being a prior necessity when their earnings were not subject to taxation within India.

Incorporating the above compliance measures is vital for non-resident e-commerce operators to ensure adherence to India’s tax regulations, fostering a climate of fair taxation and regulatory accountability.

This is meant for E commerce operators only. Those non residents only.

Apparently not applicable for Indian company ??? To check

Is Equalisation Levy applicable if your company pays subscription to a foreign website, or Foreign Service Provider – Current Situation, Facts

Source :https://www.india-briefing.com/news/equalization-levy-compliance-framework-for-non-resident-e-commerce-operators-in-india-29238.html/ 

AS THE END BUYER CUSTOMER… it is not applicable on you , sitting in India, as a subscriber in India.