Tax Hotline July 13, 2018

Mastercard has a permanent establishment in India: AAR

This article was originally published in the 19th June 2018 edition of


India’s Authority for Advance Rulings (AAR), a pre-trial tax determination body, has ruled that MasterCard’s Indian operations resulted in the constitution of a fixed place and dependent agent PE in India under the India Singapore DTAA. The AAR also ruled that employees of MasterCard Singapore visiting India constituted a service PE of MasterCard Singapore in India. In addition, the AAR found that fees paid to MasterCard Singapore by Indian customers (primarily banks and other financial institutions issued MasterCard branded cards) for payment processing services offered by MasterCard Singapore would be classified as royalty income.

The AAR has made sweeping remarks on the taxability of MasterCard in India on several counts, while also characterising transaction processing fees received by MasterCard from Indian customers to be in the nature of royalty income, and not business income. While the AAR acknowledged that significant functions of MasterCard’s business were carried on outside India, it has adopted a somewhat narrow approach to hold that certain Indian participants and digital equipment would nonetheless constitute a PE of MasterCard in India.

This article analyses the AAR’s ruling, and highlights key takeaways for digitalised businesses operating in India or receiving payments from Indian customers.

Mastercard has a permanent establishment in India: AAR

Anandu Unnikrishnan & Shipra Padhi

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