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Transfer Pricing Asia Overview

Permanent Establishment Parameters – Hong Kong Versus India

Governments across Asia are increasingly willing to assert taxation over activities of an alien business doing business that jurisdiction. These governments are more than willing to find that the activities of the alien business create a permanent establishment in that location. This permanent establishment assertion brings with it the taxability of that enterprise in that jurisdiction together with the ensuing transfer pricing considerations. This article compares and contrasts permanent establishment parameters in Hong Kong and in India.

India asserts permanent establishment status based any of the five inquiries: direct business activities, agency relationships, more than stewardship activities, and the power shift personnel, as well as a “entirety of the operations” approach. In contrast, Hong Kong based its permanent establishment activities based on more amorphous standard, “the economically significant activities and responsibilities” of the non-resident enterprise.