- We are in the process of launching a financial analytics content offering (delivered via an electronic download from a website, embedded within a proprietary software application). The application in itself does not deliver the stated value-add to the customer, without the content. The content is produced out of India in our offices. The website is also owned by us.
In the event, we have a US customer that goes to the site and downloads the application to access the financial content that is delivered within it, would the charges paid by that US customer to ANALEC be seen as License Charge (therefore fall under Royalty payments for use of Software) or will it be seen as paying for “service” in the form of a subscription agreement. I am concerned that depending on how it is perceived or presented, it may (or may not) attract with-holding taxes in the US up to 30%. I am not sure what the provisions of the US India DTAA are on this front. Does it allow for lower or no with-holding taxes on customers buying from India entities. Theoretically, one could argue it is import of “services” and therefore not liable for with-holding taxes. Can you elaborate on what we need to be mindful of in this area.
- Given that we do not intend to have a PE establishment in the US, I suppose we would not be liable for sales taxes in the US for such sales. Secondly, in your opinion, having a branch office in a particular state (to look at business opportunities; without any revenue generation at the branch level) does that constitute a PE establishment from a US tax authority interpretation standpoint?