Posts by J@TQD

This does not happen in India ... copy their method

I have a company that sells software into India. In order to ensure that India always gets their slice of tax on sales to India by foreign companies, India has something called Withholding Tax. This is based on two principles .. if you are registered in India and have a Income Tax PAN registration the tax is 10%, and i f you do not then the tax is double.

India Tax go by the premise that you need to be registered as a Corporation Tax payer in your own country in order to have the PAN registration, in which case the Double Taxation Agreement applies and you only pay half (10%). This assumes you would pay the full 20% in your own country and would claim back the 10% you paid to India as part of your tax return.

So if any foreign company sells, say $100M to anyone person or organization in the country they would have to pay HMRC $10M in Withholding Tax. They would then offset this against the Corporation Tax they would pay in their own country.

So if a company has its HQ in Luxembourg where the tax is 4% they would face a problem, but the UK Government would get the tax at 10% of SALE VALUE..

No one likes it when they do business with India, but they still flock there to sell. They manage it until they get the rebate from their own Government.

Do what India is doing to them ...

The UK Government should follow India's lead and introduce Withholding Tax deduction. In India any foreign company selling into India has to pay tax equivalent to 50% of the corporation tax payable in their home country. This means that all revenues are taxed successfully.

The way that India polices this is to put the onus on the home company to deduct the tax when paying the invoices of the foreign entity.

I am sure the UK Government can make this happen in the UK.

Currently India has forced Microsoft etc to pay hundreds of millions of dollars in 'avoided' tax. The consider this to evaded tax as the companies have intentionally looked for loopholes.

So when Microsoft UK pay Microsoft Ireland/Luxembourg or Starbucks pay their foreign entity they will need to deduct this tax from the invoice and remit this amount to the UK HMRC.

It has not stopped investments into India and I am sure it will not here. The problem in the UK is that we give them all the low tax we can and yet they see fit to abuse the system.