Following the implementation of the new IT rules, Twitter, Google, and Facebook may be required to pay higher taxes in India. In order to comply with the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, which went into effect on May 26, the companies have appointed nodal officers.
According to experts, the tax department may believe that appointing a nodal or compliance officer in India indicates that the US-based companies have a permanent establishment in the country. Companies have been looking for ways to avoid the potential tax consequences. In addition, the companies were denied permission to outsource compliance functions.
‘The government has specifically denied this request. Our client was told that the nodal officer has to be part of the US entity or a separate entity, and neither can this function be outsourced nor can they hire anyone on a temporary or consulting basis,’ sources have said.
The Indian government currently imposes an equalization levy, or ‘Google tax,’ on such companies – 6% on advertising revenue and 2% on digital transactions.
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