—Guide
Remote Employees and Secondments: PE Risk for Foreign Companies in India
How remote workers in India and secondments to Indian entities can create a taxable presence for foreign companies, and how to structure them safely.
Two modern working patterns create PE questions many foreign companies don't anticipate: employees working remotely from India, and staff seconded between a foreign parent and its Indian subsidiary. This guide explains the risks and how to manage them.
Remote Employees in India
A foreign company employing someone who works from India — perhaps a returning Indian, or a remote hire — could face PE risk depending on:
- Whether the employee's home or workspace is at the company's disposal as a place of business.
- Whether the employee concludes contracts, or plays the principal role in concluding them, for the company.
- How long services are provided in India, for treaties with a service PE clause.
- Whether the role is core revenue-generating work or support.
A remote developer doing back-office work for a foreign company carries very different risk from a remote sales head negotiating Indian contracts.
Secondments
Groups often second employees from a foreign parent to an Indian subsidiary, or the reverse. Key questions include:
- Who controls and directs the secondee's work?
- Who bears the risk of their performance?
- Who is the economic employer, and who ultimately bears their cost?
- How is their salary reimbursed between entities?
If a secondee continues to work for the foreign parent while in India, a PE can arise for the parent, and reimbursements between entities can raise withholding questions.
Payroll and Social Security
Separately from PE, remote employees and secondees raise questions about Indian payroll tax withholding, and social security under Indian rules or any applicable social security agreement.
Managing the Risk
- Map everyone working from India for foreign group companies.
- Limit contract-concluding authority for people in India, unless intended.
- Structure secondments so the Indian entity directs and bears the secondee's work, where that's the intent.
- Document reimbursements and their basis.
- Consider employing people through the Indian entity instead.
Getting Help
Think Filing reviews remote working and secondment arrangements for PE, withholding and payroll risk.