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Hindustan Times
5 days ago
- Business
- Hindustan Times
Operational control enough to tax foreign firms in India, says SC
The Supreme Court on Thursday held that a multinational company may be taxed in India so long as it exercises significant operational control over such premises, even if it has no employees staying here for a period longer than the threshold typically used to assess whether the company is a so-called Permanent Establishment. Operational control enough to tax foreign firms in India, says SC The ruling , which has significant implications for MNCs operating in India, came as a setback to Dubai-based Hyatt International Southwest Asia Ltd, which had challenged its tax liability in India for advisory and management services rendered to Hyatt hotels across the country between 2009 and 2018. A bench of justices JB Pardiwala and R Mahadevan affirmed a 2023 Delhi High Court judgment that recognised Hyatt's presence in India as a Permanent Establishment (PE) under Article 5(1) of the India-UAE Double Taxation Avoidance Agreement (DTAA). The court concluded that Hyatt's active control over the day-to-day hotel operations in India through long-standing agreements established a fixed place PE, making it liable to pay tax in India. Typically, only branch offices, factories, mines etc are considered PEs, although there is also a stipulation related to the time employees spend in India. At the centre of this case was a Services and Operating Services Agreement (SOSA) signed by Hyatt with hotel owners in India, under which the Dubai-based entity provided hotel advisory and consultancy services. Hyatt contended that it operated solely from Dubai, was not obliged to station staff in India, and only permitted occasional visits by its personnel to Indian hotels. It further argued that the SOSA contained no clause allowing it to conduct business from within the hotels, nor did it maintain any office or branch in India. But the top court rejected these submissions, holding that the 'disposal test' for identifying a PE did not require exclusive possession or formal rights over premises, but a fact-specific inquiry into the foreign enterprise's ability to conduct core business functions from the premises. 'The appellant's contention that the absence of an exclusive or designated physical space within the hotel precludes the existence of a PE, is misconceived, said the court, relying on its earlier precedent in Formula One World Championship Ltd ()2017. 'Temporary or shared use of space is sufficient, provided business is carried on through that space,' it added. In this case, the bench found that Hyatt exercised 'pervasive and enforceable control' over the hotel's strategic, operational, and financial aspects. This included the authority to appoint and supervise key personnel, implement HR and procurement policies, control pricing and branding, operate bank accounts, and assign staff to the hotel without the owner's approval. 'These rights go well beyond mere consultancy and indicate that the appellant was an active participant in the core operational activities of the hotel,' said the court, noting that Hyatt's control extended to everyday affairs and not just high-level decisions. Amit Baid, Head of Tax at BTG Advaya law firm, said that the ruling could set a precedent for PE determinations in cases involving frequent employee travel to India. 'The judgment provides a clear conceptual framework for determining PE thresholds -- frequent, regular visits by employees, rather than the duration of individual stays, is the key factor. Once continuity of business presence is established, the return or rotation of individuals becomes irrelevant; and operational control, oversight, and income linked to core functions establish a commercial nexus necessary for a PE,' Baid added. The judgment meanwhile stressed that the 20-year duration of the agreements, combined with continuous and structured involvement of Hyatt's executives in India, satisfied the three-pronged test of stability, productivity, and dependence that governs the recognition of a PE. Further, the court ruled that even though no single Hyatt employee exceeded the 9-month threshold under Article 5(2)(i) of the DTAA, the aggregate and continuous presence of various employees, verified through travel logs and operational duties, fulfilled the requirement of a PE. The court clarified that the legal form of presence is secondary to the economic substance of business functions being carried out in India. 'The appellant's ability to enforce compliance, oversee operations, and derive profit-linked fees from the hotel's earnings demonstrates a clear and continuous commercial nexus and control with the hotel's core functions,' the bench said, calling the hotel premises the 'situs of the appellant's primary business operations.' Importantly, the Supreme Court clarified that under the India–UAE Direct Taxation Avoidance Agreement, the lack of a specific article allowing taxation of Fees for Technical Services (FTS) would not override the existence of a PE under Article 5(1), particularly where core business functions are carried out through a fixed place.
Mint
6 days ago
- Business
- Mint
Hyatt faces India tax blow as Supreme Court confirms ‘Permanent Establishment' status
In a crucial ruling with broad implications on how multinational companies are taxed in India, the Supreme Court on Thursday held that UAE-based Hyatt International Southwest Asia, which provides hotel advisory services in India, has a taxable Permanent Establishment (PE) in the country. A bench comprising Justices J.B. Pardiwala and R. Mahadevan upheld Delhi High Court's earlier decision, which had ruled that Hyatt's Indian PE must be treated as a distinct taxable entity. The judgment is significant as it clarifies that multinational companies can be taxed in India if they exercise substantial operational control here, even without long-term employee presence. The court held that a PE should be treated as a separate taxable entity, meaning India can tax profits attributable to the PE even if the foreign parent company incurs overall global losses. The apex court noted that Hyatt's executives and employees made frequent and regular visits to India to supervise operations and implement business decisions. While no single employee stayed beyond the nine-month threshold under Article 5(2)(i) of the India-UAE Double Taxation Avoidance Agreement (DTAA), the assessing officer's findings proved a continuous and coordinated business presence. Hyatt had approached the Supreme Court challenging the September 2024 Delhi High Court Full Bench judgment, which had held that Hyatt's Indian PE was taxable regardless of the company's global profitability. The top court agreed with the High Court's conclusion that Hyatt's role extended beyond high-level decision-making to substantial operational control and implementation in India. Its ability to enforce compliance, oversee hotel operations, and earn profits linked to hotel revenues established a clear and continuous commercial nexus with its Indian operations, satisfying the fixed place PE conditions under the DTAA. Hyatt had argued that under Article 7 of the India-UAE DTAA, India could tax the PE's profits only if the foreign enterprise as a whole was profitable. However, tax authorities maintained that the PE should be assessed as a separate and independent entity, regardless of the parent company's global financial performance. 'The judgment provides a clear conceptual framework for determining PE thresholds—frequent, regular visits by employees, rather than the duration of individual stays, are the key factor. Once continuity of business presence is established, the return or rotation of individuals becomes irrelevant. Operational control, oversight, and income linked to core functions establish the commercial nexus necessary for a PE. This ruling could set a precedent for PE determinations in cases involving frequent employee travel to India,' said Amit Baid, head of tax at BTG Advaya, a disputes and transactional law firm. Under Double Taxation Avoidance Agreements (DTAAs), a Permanent Establishment (PE) is a fixed place of business, such as a branch, office, factory, or dependent agent, through which a foreign company operates in another country. Article 5 of the India-UAE DTAA defines what constitutes a PE, including fixed place PE, agency PE, and service PE. Having a PE in India gives Indian tax authorities the right to tax profits attributable to that PE, treating it like a local entity, irrespective of the parent company's global results. Article 7 allows India to tax only the profits linked to the PE's activities, calculated as if it were an independent enterprise. Foreign enterprises without a PE in India are not taxed here on business profits. The Hyatt PE taxation case originated when Indian tax authorities assessed that Hyatt had enough presence in India to be taxed, as its executives frequently visited and controlled hotel operations, despite no single employee staying long-term. These assessments dated back to 2011 onwards. Hyatt challenged the findings in the Delhi High Court in 2020, arguing that under the tax treaty, India could tax the PE only if the global enterprise was profitable. In January 2023, a Division Bench of the High Court referred the matter to a Full Bench for deeper examination. In September 2024, the Full Bench ruled that Hyatt did have a PE in India because of its continuous operational involvement and held that the PE should be taxed as a separate entity. Hyatt then appealed to the Supreme Court, leading to Thursday's ruling.
Time of India
22-07-2025
- Business
- Time of India
India-UAE Trade at $100 bn since signing CEPA
India-UAE bilateral trade has risen to $100.06 billion in FY25 from $72.87 billion in FY22 since the signing of India-UAE Comprehensive Economic Partnership Agreement ( CEPA ) on February 18, 2022 and came into force on May 1, 2022. India's merchandise exports to UAE have grown to $36.63 billion in 2024-25 from $28.04 billion in 2021-22, a growth of 7%. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Walgreens Won't Like This: A Legal 87¢ Generic Viagra Trick for Everyone fridayplans Learn More Undo
Mint
21-07-2025
- Business
- Mint
How are right entitlement transfers taxed?
I am a non-resident Indian (NRI) currently residing in the United Arab Emirates (UAE). I hold shares of Mahindra Logistics Ltd, and it has just announced a rights issue. I don't want to subscribe to the issue, but want to sell the rights entitlements to a fellow NRI. What are the tax implications of doing that? The right to subscribe to financial assets (such as equity shares) is distinct from such assets themselves. The Hon'ble Supreme Court of India has held that the right to subscribe to additional securities on a rights basis arises only after the company announces the rights issue. Until such an announcement, this right, though inherent in the shareholding, remains inchoate and does not crystallise. Upon announcement, this 'Right Entitlement' (RE) becomes a separate and independent capital asset, transferable independently of the underlying shareholding. If not exercised or renounced before the issue closing date, REs lapse and are extinguished. These REs are generally qualified as short-term capital assets, as the offer for rights issues is typically open for a limited period during which the REs can be renounced. REs for listed companies are credited to the demat accounts of eligible equity shareholders who may renounce either: • On-market, via the stock exchange (which attracts Securities Transaction Tax (STT)), or • Off-market, through a private transfer (which does not attract STT). In both scenarios, any gain from the transfer of REs is taxable as short-term capital gain at the applicable slab rates, with the entire sale consideration becoming taxable, since the cost of acquisition is deemed to be nil as per Indian tax law. From a cross-border tax perspective, since REs are distinct from equity shares, they fall under Article 13(5) of the India-UAE Double Taxation Avoidance Agreement (DTAA), which is the residuary clause that covers gains from the alienation of property not covered elsewhere in Article 13. Under this clause, such gains are taxable only in the country of residence, i.e., the UAE, and not in India. Consequently, capital gains from the sale of REs by a UAE tax resident are not taxable in India under the India-UAE DTAA. To claim this benefit under the India-UAE DTAA, the following compliance is required: (a) obtain a valid Tax Residency Certificate (TRC) from UAE authorities; (b) submit Form 10F on the Indian income tax portal and (c) file an income tax return in India disclosing the capital gain and reporting it as exempt under Article 13(5). Harshal Bhuta is a partner at P. R. Bhuta & Co. Chartered Accountants.
News18
18-07-2025
- Business
- News18
How The India-UAE Partnership Is Redefining Global Luxury Real Estate
In 2024 alone, Indians accounted for the largest share of all real estate purchases in Dubai, with nearly half of all prime property buyers being Indian nationals Not long ago, cities such as London, New York, and Singapore were the go-to choices for affluent Indians looking to invest in overseas real estate. But the tide is turning. A 2025 survey by Sotheby's International Realty revealed that Dubai has now overtaken London as the top international property destination for India's ultra-rich. A parallel study from the Dubai Land Department (DLD) showed that interest in overseas real estate among India's affluent has surged to 22 per cent, up from approximately 10 per cent historically. And even here, Dubai is clearly the frontrunner. As a real estate developer building in the UAE, I don't see this as just a passing trend; it's history in motion. In 2024 alone, Indians accounted for the largest share of all real estate purchases in Dubai, with nearly half of all prime property buyers being Indian nationals. As the UAE positions itself as a global capital for luxury real estate, India is playing a defining role in that rise. Cross-Border Investments One of the key reasons the India-UAE real estate partnership holds such immense promise is that this synergy is a two-way street, built on mutual value and long-term alignment. The UAE, for instance, offers unparalleled financial depth. Abu Dhabi's sovereign wealth funds collectively manage over US$1.7 trillion in assets, ranking them among the world's largest. Backed by such robust capital, the UAE consistently finances major developments worldwide, including those in India. $240 million in residential projects across major Indian cities, with a development value exceeding $2.1 billion, have already been invested by leading conglomerates in India and the UAE. Multiple real estate projects across Indian cities, including Bengaluru, Indore, and Mumbai, have begun through collaborations between Indian and Dubai firms. Moreover, with the Indian government permitting 100 per cent foreign direct investment (FDI) in the hospitality industry, the future looks bright for UAE-based investors seeking opportunities in luxury accommodations and wellness retreats in India. India, in turn, is the world's talent powerhouse. With 1.5 million engineers and 15,000 architects produced annually, the country offers a vast, cost-effective workforce with expertise in sustainable urban development. This talent fuels projects across international markets. At the same time, the UAE has a growing demand for skilled labour, particularly in engineering, architecture, and construction, driven by the scale and pace of its ongoing infrastructure boom. This presents a timely opportunity. As real estate cooperation between the two nations deepens, a bilateral framework for workforce collaboration could be a strategic next step. Streamlining the mobility of certified Indian professionals would help address the UAE's talent gaps while further strengthening integration and trust between both markets. Impetus From The Regimes Recognising the scale of Indian investment, both governments are actively encouraging the India-UAE luxury real estate partnership. In April 2025, the Dubai Land Department launched its Real Estate Connect roadshow in New Delhi, reaffirming India as a strategic partner. Policy support has followed suit. The UAE's expanded Golden Visa, zero-tax regime, and flexible residency options have made it a magnet for Indian HNIs. Landmark agreements, such as the 2022 Comprehensive Economic Partnership Agreement (CEPA) and the 2024 Bilateral Investment Treaty (BIT), are expected to further ease cross-border investments. Yet, this is only the beginning. To further coalesce the growing momentum, both nations can take proactive steps to institutionalise and scale this partnership. A dedicated India–UAE Real Estate and Infrastructure Forum would help coordinate bilateral investments and streamline large-scale development. Such a forum would help facilitate joint investments in cross-border real estate ventures, REITs, and private capital flows. This can be headquartered within hubs like GIFT City in Ahmedabad, India, and the DIFC in the UAE for maximum impact. These measures would move the partnership from merely promising to truly transformative. Conclusion As the saying goes, 'When the winds of change blow, some build walls—others build windmills." India and the UAE have chosen to build not just windmills, but entire cities. As capital flows from the UAE meet India's deep reservoir of talent and ambition, the two nations are now proactively reshaping the global luxury real estate market. Beyond building world-class skylines, the two nations are redefining where and how global wealth seeks residence, identity, and opportunity. This alliance, once rooted in oil, trade, and diaspora, may now be laying the foundation for a third pillar in bilateral relations built on the solid foundation provided by luxury real estate synergy. It's no longer just about economic exchange, but about co-creating global landmarks and lifestyle ecosystems that reflect shared values of aspiration, security, and innovation. And in doing so, they're redrawing the map of global luxury, brick by brick, and idea by idea. The author is Chairman and Founder of BnW Developments, a UAE-based real estate platform with an active Asset Under Management (AUM) of AED 15 billion, focused on luxury development and high-growth urban assets. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect News18's views. view comments First Published: July 18, 2025, 10:42 IST News opinion Opinion | How The India-UAE Partnership Is Redefining Global Luxury Real Estate Disclaimer: Comments reflect users' views, not News18's. Please keep discussions respectful and constructive. Abusive, defamatory, or illegal comments will be removed. News18 may disable any comment at its discretion. By posting, you agree to our Terms of Use and Privacy Policy.
