Tax troubles are rearing their head again for international law firms in India, following a Mumbai tax tribunal’s ruling Friday that British legal giant Linklaters owes taxes on fees earned on work that was referred from India but was not necessarily performed in the country. Here’s an analysis by Kian Ganz of Mumbai-based legal blog Legally India.
Linklaters, like other foreign firms, is barred from having offices in India, but the Mumbai Income Tax Appellate Tribunal (ITAT) applied a retrospective 2010 amendment to Indian tax laws deeming foreign service providers to have a “permanent establishment” or “fixed base” if their employees — like many international lawyers — spend more than 90 days a year in India. Work by such providers on behalf of Indian clients is considered taxable, even if performed outside of India.
