Cross-Border Tax Structuring & DTAA Advisory: Who Needs It and Who Does Not
Whether Cross-Border Tax Structuring & DTAA Advisory applies to a given business is the first thing worth settling, and it is where most of the early questions land. The questions below are the ones raised most often in practice; the full scope of the service is on the Cross-Border Tax Structuring & DTAA Advisory page.
Should I set up a holding company in the UAE or Singapore?
Both are used extensively, but for different reasons. UAE (specifically Dubai or Abu Dhabi Free Zones) is typically preferred for: founders or promoters who are UAE residents, businesses with significant Gulf and MENA market exposure, businesses that benefit from UAE's 0% personal income tax environment, and groups wanting UAE as a regional hub. Singapore is typically preferred for: tech and digital businesses with APAC operations, IP-intensive businesses (Singapore's IP incentives), businesses targeting US/global investors familiar with Singapore structuring, and businesses that want English-law governed corporate documents. The key difference in treaty terms: India-UAE DTAA and India-Singapore DTAA have different rates and provisions. Post-MLI, both require genuine substance in the holding jurisdiction.
In practice: We do not have a blanket preference. The right jurisdiction is the one that serves your genuine commercial purpose, where you have or will have real presence, and whose DTAA provisions best match your income flow profile. We model both options for clients and present a comparison before any decision is made.
What is the FLA Return and who must file it?
The Foreign Liabilities and Assets (FLA) Return is an annual RBI survey that must be submitted by 15 July each year by any Indian company that has received Foreign Direct Investment (FDI) or has made Overseas Direct Investment (ODI) — or both. It is filed directly on the RBI FLAIR (Foreign Liabilities and Assets Information Reporting) system. The FLA captures the balance sheet position of FDI and ODI — the stock of foreign assets and liabilities of the Indian company. Failure to file or late filing attracts a penalty under FEMA. Companies that received FDI in a prior year but have fully repatriated must still file until the portfolio is nil.
In practice: The FLA is frequently confused with the FC-GPR (which is transaction-based) and the APR (which is ODI-entity-specific). All three may be required for the same group, and all three have different portals, due dates, and formats. We manage all three as a unified cross-border compliance calendar.
What is transfer pricing and when does it apply to my India cross-border transactions?
Transfer pricing rules apply to any transaction between an Indian company and a related foreign company — collectively called 'associated enterprises' under Section 92A of the Income-tax Act 1961 (which governs income up to FY 2025-26; from tax year 2026-27 the Income-tax Act 2025 applies with renumbered sections and forms, so confirm the corresponding provisions). The rules require that the price of such intercompany transactions be at 'arm's length' — what independent parties would agree in comparable circumstances. Covered transactions include: payment of management fees, royalties, or licence fees to a foreign parent or subsidiary; purchase or sale of goods or services with a foreign related party; interest on cross-border loans; guarantee fees; and any other financial dealings. Form 3CEB — the accountant's report on the international transactions — must be furnished electronically by the prescribed due date.
In practice: Transfer pricing is an area where Indian income-tax authorities have historically been aggressive. The transfer pricing officer (TPO) can make an adjustment if the price is not supported by a proper contemporaneous study. The penalty for non-maintenance of TP documentation is 2% of the value of the international transaction under Section 271AA. A TP adjustment can also attract a penalty under Section 270A (50% of the tax on under-reported income, or 200% for misreporting), although an adjustment is generally excluded from under-reporting where the required documentation was maintained and the transaction was properly disclosed. Sections 271AA and 270A are 1961-Act provisions; equivalent provisions apply under the Income-tax Act 2025 from tax year 2026-27. A robust TP study prepared at the start of the year — not after the fact — is the correct approach.
What is a Permanent Establishment (PE) and how does my Indian company avoid creating an unintended PE abroad?
A Permanent Establishment is a fixed place of business through which a foreign enterprise carries on business in a country. If your Indian company has a PE in another country, that country can tax the income attributable to the PE at its corporate tax rate — creating a tax liability you may not have planned for. PEs can arise in several ways: maintaining a fixed office or equipment in a country (fixed place PE), having an agent in a country who has authority to conclude contracts on your behalf (dependent agent PE), or conducting construction or service activities in a country beyond certain time thresholds (service PE). DTAAs define what constitutes a PE for treaty purposes — and the threshold periods and conditions vary by treaty.
In practice: One unintended PE scenario for Indian businesses: sending employees to work at a client site or group entity location abroad for extended periods. Even without a formal office, a dependent agent PE or service PE can arise. We assess PE exposure as part of every cross-border structuring engagement and in every expansion discussion.
What is the UAE Corporate Tax and how does it interact with my India-UAE structure?
The UAE introduced a federal Corporate Tax (CT) at 9% on taxable income above AED 375,000, effective for financial years beginning on or after 1 June 2023, administered by the Federal Tax Authority (FTA). Income below AED 375,000 is taxed at 0%. Qualifying Free Zone Persons (QFZPs) can benefit from a 0% CT rate on qualifying income, provided they pass the Qualifying Activities test and Excluded Activities test, maintain adequate substance in the free zone, and do not have a domestic permanent establishment in the UAE mainland. Dividends and capital gains received by a UAE holding company from a qualifying subsidiary may be exempt under the Participation Exemption provisions (generally applicable where the UAE HoldCo holds at least 5% in the subsidiary for at least 12 months). The interaction with the India-UAE DTAA means: if the UAE entity pays UAE CT on income, it may claim a credit for Indian withholding tax suffered; and Indian withholding tax on dividends, royalties, or fees paid to the UAE entity must still be correctly managed.
In practice: UAE CT is new and its interaction with existing India-UAE structures needs careful review. Free Zone benefits are available only if the substance and qualifying activities tests are genuinely met. A UAE free zone entity that generates most of its income from transactions with Indian related parties faces scrutiny on whether that income qualifies for the 0% rate. PNPC's Dubai office manages UAE CT registration, return filing, and the India-UAE CT interaction analysis.
What is Form 15CA and Form 15CB — and when must they be filed?
Form 15CA is an online declaration filed by the Indian payer on the income-tax e-filing portal before making any remittance outside India that is taxable in India. Form 15CB is a certificate issued by a CA that verifies the nature of the payment, the applicability of a DTAA, and the correct tax withholding (TDS). The two forms are linked: in cases where a CA certificate is required, Form 15CB is prepared first, and then Form 15CA is filed using the details from Form 15CB. The bank requires both forms (where applicable) before processing a cross-border remittance. Not all payments require both forms — there is a prescribed list of exempted payments, and the rule varies based on the nature and amount of the payment. These are the forms under the Income-tax Act 1961; for remittances made on or after 1 April 2026 the equivalent forms under the Income-tax Act 2025 are Form 145 (formerly 15CA) and Form 146 (formerly 15CB), so confirm the current forms, thresholds and exemptions before remitting.
In practice: The Rules under Section 195 have evolved. Under the 1961 Act regime, payments of income taxable in India (including royalties, fees for technical services, interest) require Form 15CB and Form 15CA. Certain other payments are exempt. Getting the classification wrong — filing neither form for a taxable payment, or filing the wrong form category — exposes the payer to TDS demand, interest, and penalty. Form 15CA/15CB compliance is a standard part of cross-border remittance management for payers with overseas payees.
Do I need transfer pricing documentation if my intercompany transactions are small?
There is a Safe Harbour regime for certain categories of qualifying transactions (for example, IT services and specified financial transactions such as intra-group loans and guarantees) that provides a defined arm's length price — if the entity's actual pricing falls within the safe harbour range, the TP documentation requirement is simplified and there is generally no TP adjustment by the authorities for those transactions. Under the 1961 Act this sat in Rule 10TD of the IT Rules, with elections made in Form 3CEFA; the categories, margins and eligibility thresholds were revised for tax year 2026-27 under the Income-tax Rules 2026, with a different form, so confirm the current rules before relying on any safe harbour.
In practice: Safe harbour rules are valuable for IT/ITeS companies with qualifying service transactions. However, the eligible transaction types and the qualifying margins are specifically defined — not every intercompany services transaction qualifies. We assess safe harbour eligibility at the start of each tax year and advise whether it is cost-effective relative to a full TP study.
What are the substance requirements for a UAE Free Zone holding company?
To qualify as a Qualifying Free Zone Person (QFZP) under UAE Corporate Tax law and benefit from the 0% tax rate on qualifying income, a UAE Free Zone entity must: (a) maintain adequate substance in the UAE Free Zone (employees, office, decision-making); (b) earn only qualifying income as defined by the Cabinet and Ministerial decisions; (c) not earn more than a permissible threshold of non-qualifying income (generally 5% of total revenue or AED 5 million, whichever is lower); (d) maintain audited financial statements; and (e) not have a domestic PE in the UAE mainland (or manage any mainland income separately under 9% CT). The specific qualifying activities are listed in the relevant UAE Ministerial Decision.
In practice: Substance requirements for UAE Free Zone entities are now codified under UAE CT law. This has formalised what was previously best practice. Many older UAE free zone structures that were set up as 'paper companies' with no employees or genuine activity now need to be reviewed. PNPC's Dubai office conducts substance assessments and advises on the actions needed to satisfy the QFZP criteria.
What is the India-Singapore DTAA's Limitation of Benefits (LOB) clause?
The India-Singapore DTAA includes a Limitation of Benefits (LOB) clause (Article 24A) that denies treaty benefits to shell or conduit companies. On the treaty text as summarised in published commentary, a Singapore company is not treated as a shell or conduit if it is listed on a recognised stock exchange, or if its total annual expenditure on operations in Singapore is at least S$200,000 in the 24 months preceding the date the benefit is claimed. Post-MLI, the PPT has been added as an additional check. The old exemption from Indian tax on gains from sale of shares of an Indian company survives only for shares acquired before 1 April 2017; for later acquisitions India has the right to tax the gains, subject to transitional concessional treatment that applied until 31 March 2019. Confirm the current treaty text before relying on any of this. Singapore entities that are pure holding companies owned by Indian residents — without any Singapore-based economic activity or independent management — face high risk of being denied treaty benefits.
In practice: The India-Singapore DTAA's capital gains exemption used to be one of the most valued provisions in cross-border structuring for tech businesses, but it now survives only for shares acquired before 1 April 2017, and even for those, treaty benefits depend on the entity passing the LOB test and the PPT. For newer investments, gains on sale of Indian company shares are taxable in India. Designing for the LOB test from Day 1 is essential — retrofitting substance into a bare holding company is difficult and unconvincing to tax authorities.
Where this sits in the wider engagement
Cross-Border Tax Structuring & DTAA Advisory rarely arrives on its own. The statutory basis and the current requirements are set out on the Cross-Border Tax Structuring & DTAA Advisory service page, and the related services are grouped under Business Setup.
What PNPC does
PNPC Global has practised since 1986 across India and the UAE. On Cross-Border Tax Structuring & DTAA Advisory we take the work end to end — reviewing the facts, preparing and filing what is required, and dealing with the authority through to closure.