In order to benefit from an exemption of a country’s withholding taxes, in some cases it is possible to register with the government of your customer’s country to prove that you pay taxes in your own country and to avoid any income being withheld.
Supply of Services – Example: INDIA / PAN
- Companies selling intellectual services in India without having a permanent establishment are required to request a PAN (Permanent Account Number) from the Indian tax authorities. This avoids the foreign company having its Indian customers withhold a part of its Indian sales income.
- VAT Systems can handle all the procedures necessary to obtain a PAN number for your company.
Royalties – Example: UNITED STATES / EIN
- Foreign companies invoicing royalties to US customers may have to pay withholding taxes to the US government. In order to avoid this, VAT Systems will register the foreign company before the US tax administration and obtain an EIN (Employer Identification Number) for the account of the company.
- Once registered, VAT Systems will submit the periodic declarations of royalties, as well as the annual federal income tax declaration.
Construction Sector – Example: THE UK / CIS
- In the United-Kingdom, companies working in the construction sector as contractors or subcontractors fall within the scope of the Construction Industry Scheme (CIS) and are required to register with the tax authorities.
- Once registered within the scheme, local or foreign contractors and subcontractors have their set of declarative obligations.
- VAT Systems is at your disposal to act as your CIS tax agent in order to register your company, file your CIS returns and recover the withholding tax.
A withholding tax is a government requirement for the payer of an item of income, to withhold or deduct tax from this payment and pay that tax to the government. Governments apply withholding taxes in order to avoid tax evasion.