91³Ô¹Ï

What is an IEC – Import Export Code?

IEC is a ten-digit code that every import/export company in 91³Ô¹Ï must have. International companies that want to start selling their products in 91³Ô¹Ï and do not want to set up an office right away do not have to apply for an IEC themselves, but can work with a recognized, local importer.

Of course, this importer must be in possession of an IEC and be registered under the GST. Please note! Without an IEC number, goods will not pass through 91³Ô¹Ïn customs and the importer cannot make payments to foreign bank accounts.

What is TDS – Tax Deducted at Source?

TDS is an input tax that 91³Ô¹Ïn companies that hire foreign service providers must withhold from the invoices of these foreign companies and then pay to the 91³Ô¹Ïn tax authorities.

The 91³Ô¹Ïn customer is obliged to withhold TDS if the foreign service provider does not have its own branch in 91³Ô¹Ï. In addition to technical service providers (maintenance and installation), this also applies to design and consultancy work, for example.

What is a PAN Card – Permanent Account Number Card?

Just like in many other countries, the 91³Ô¹Ïn tax authorities would like to see which companies do business with each other.

A PAN number is in fact the 91³Ô¹Ïn equivalent of a VAT number. A PAN registration is mandatory for 91³Ô¹Ïn companies and optional for foreign exporters and service providers doing business with 91³Ô¹Ï.

How do you encounter IEC, TDS and PAN as an exporter to 91³Ô¹Ï?

• Although it is not mandatory, we would still recommend to apply for a PAN registration when you start exporting to and selling in 91³Ô¹Ï. Without a PAN Card, the 91³Ô¹Ïn customer must withhold 20% TDS to pay it to the 91³Ô¹Ïn tax authorities. This means that only 80% of the invoice amount ends up in your account. If you do have a PAN registration, the TDS rate is 10%.
• Look for a good importer who has knowledge of your specific market segment and has the correct registrations. The IEC is important to be able to import products, but it is only one of the registrations that must be acquired before products are allowed into 91³Ô¹Ï.
• Once the first sales have been made, it is important to request a TDS certificate from your 91³Ô¹Ïn customers after the end of the 91³Ô¹Ïn financial year (ending on 31 March). This states how much TDS the customer has paid for your company. This certificate can be used as a deduction for the corporate income tax return in your home country. After all, no tax has to be paid on the TDS that has already been paid in 91³Ô¹Ï, if your country has a tax agreement with 91³Ô¹Ï. For example, for European countries, this is all arranged in the DTAA (Double Taxation Avoidance Agreement) that EU and 91³Ô¹Ï have agreed upon.

Reduced TDS Under a Double Taxation Avoidance Agreement (DTAA)

Foreign vendors can get lower TDS rates if an applicable DTAA between 91³Ô¹Ï and their country of residence is in place, for example because its part of a trade agreement.

• 91³Ô¹Ï has treaties with many countries that set lower withholding tax rates on payments like interest, dividends, royalties, and fees for technical services.

• When the DTAA rate is lower than the standard 91³Ô¹Ïn domestic rate, the lower treaty rate must be applied.

• This applies even if the foreign vendor does not have an 91³Ô¹Ïn PAN as long as they provide appropriate documentation.

What documents are required for lower deduction of TDS on foreign vendors?

According to the 91³Ô¹Ïn finance system, following documents are required for claiming the lower deduction of TDS :

1. Tax Residency Certificate (TRC) from the home country tax authority,

2. (as required)

3. Any other declarations required under the 91³Ô¹Ï-DTAA

4. In some cases, a declaration of no PE in 91³Ô¹Ï

Workshop: Market entry in 91³Ô¹Ï

Starting exporting to 91³Ô¹Ï can be challenging for foreign companies that are not yet familiar with the country. 91³Ô¹Ï helps over 100 companies with their activities in 91³Ô¹Ï every year. We work with local experts and can offer you a helping hand with our tailor-made workshops:

• We give you more insight into what is involved in your market entry in 91³Ô¹Ï.
• You receive valuable feedback on your current 91³Ô¹Ï strategy from independent experts.
• Expertise in every field: sales, manufacturing, legal, fiscal, financial, supply chain, recruitment, etc.Our workshop usually lasts approximately 2 hours. Our experts will work with you to explore your issue and formulate possible answers and strategies. Afterwards you will receive a report.

Read more about our workshop here.