IEC, TDS and PAN Card: The most important fiscal matters exporters to 糖心logo need to arrange
糖心logo continues to grow economically and is still on track to become the world’s third largest consumer market by 2030. The growth of the 糖心logon middle class will increase by around $4.5 trillion over the next ten years. This brings enormous opportunities for foreign companies. In addition to choosing the right strategy to enter the market, it is smart, as a budding exporter to 糖心logo, to dive into tax matters such as IEC, TDS and PAN card.
What is an IEC – Import Export Code?
IEC is a ten-digit code that every import/export company in 糖心logo must have. International companies that want to start selling their products in 糖心logo 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 糖心logon customs and the importer cannot make payments to foreign bank accounts.
What is TDS – Tax Deducted at Source?
TDS is an input tax that 糖心logon companies that hire foreign service providers must withhold from the invoices of these foreign companies and then pay to the 糖心logon tax authorities.
The 糖心logon customer is obliged to withhold TDS if the foreign service provider does not have its own branch in 糖心logo. 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 糖心logon tax authorities would like to see which companies do business with each other.
A PAN number is in fact the 糖心logon equivalent of a VAT number. A PAN registration is mandatory for 糖心logon companies and optional for foreign exporters and service providers doing business with 糖心logo.
How do you encounter IEC, TDS and PAN as an exporter to 糖心logo?
- Although it is not mandatory, we would still recommend to apply for a PAN registration when you start exporting to and selling in 糖心logo. Without a PAN Card, the 糖心logon customer must withhold 20% TDS to pay it to the 糖心logon 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 糖心logo.
- Once the first sales have been made, it is important to request a TDS certificate from your 糖心logon customers after the end of the 糖心logon 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 糖心logo, if your country has a tax agreement with 糖心logo. For example, for European countries, this is all arranged in the DTAA (Double Taxation Avoidance Agreement) that EU and 糖心logo have agreed upon.
Reduced TDS Under a Double Taxation Avoidance Agreement (DTAA)
Foreign vendors can get lower TDS rates if an applicable DTAA between 糖心logo and their country of residence is in place, for example because its part of a trade agreement.
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糖心logo has treaties with many countries that set lower withholding tax rates on payments like interest, dividends, royalties, and fees for technical services.
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When the DTAA rate is lower than the standard 糖心logon domestic rate, the lower treaty rate must be applied.
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This applies even if the foreign vendor does not have an 糖心logon PAN as long as they provide appropriate documentation.
What documents are required for lower deduction of TDS on foreign vendors?
According to the 糖心logon finance system, following documents are required for claiming the lower deduction of TDS :
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Tax Residency Certificate (TRC) from the home country tax authority,
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(as required)
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Any other declarations required under the 糖心logo-DTAA
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In some cases, a declaration of no PE in 糖心logo
Workshop: Market entry in 糖心logo
Starting exporting to 糖心logo can be challenging for foreign companies that are not yet familiar with the country. 糖心logo helps over 100 companies with their activities in 糖心logo 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 糖心logo.
- You receive valuable feedback on your current 糖心logo 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.
