India’s Endemol Wins Tax Exemption for Overseas Film and TV Shoot Payments
In a test case brought by Indian production company Endemol, India’s Authority of Advanced Rulings (AAR) has agreed that payments made by Indian production houses to overseas entities for their services in film and TV show shootings abroad are not subject to tax in India.
To avoid protracted litigation Endemol, producer of reality shows such as
, asked the AAR to rule on the tax position in India relating to payments it made to two overseas companies. In both cases the AAR ruled that the foreign entities would not be subject to tax in India.
During 2010-11, Endemol produced a reality show shot largely took in Brazil and engaged Singapore-based company Noise Associates to procure the services of technical expert Chantal Prud’ Homme as executive producer for the show. After examining the contract AAR held that payments made to the latter fell within the parameters of the exclusion clause contained in the Article – Royalties and Fees for Technical Services in the India-Singapore tax treaty. Thus, there would be withholding of tax in India against payments made to Noise Associates for its services. Further, as the Singapore company had no permanent establishment or fixed place of business in India, payments received by it could also not be taxed in India as business income.
The AAR also reviewed payments made by Endemol in 2010-11 related to the shooting of a reality show in Argentina. In this case, the Indian production house used the services of an Argentine company, which provided technical and production crew and equipment for the overseas shoot. The AAR observed that the composite contract was in the nature of a works contract under section 194C of the Indian Income Tax Act. The services were rendered and used outside India and the payments were also received by the Argentine company outside India. Thus, in the absence of any business connection in India, the payments could not be subject to tax in India, AAR held.