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Permanent Account Number (PAN) for Foreign Companies

Every recipient of income is now required to provide a Permanent Account Number (PAN) or tax registration number to the payer beginning April 1, 2010. Should the recipient fail to provide a PAN, the withholding tax rate, if applicable, would be higher at the following rates:

» rate specified in the relevant section depending on the nature of payment;
» rates in force (rate specified in the ITA or under the tax treaty);
» rate of 20 percent;

Authorities will not consider an application from the recipient for a lower withholding tax rate if no PAN is provided. This is despite the fact that a lower rate is provided under the ITA or the tax treaty, tax will be required to be withheld at 20 percent in India.

The PAN must be present in all correspondence, bills, vouchers and other documents between the recipient and payer. A foreign company with no PAN at the time of receipt of income will need to apply for PAN soon after and file return of income in India to be able to claim excess tax refund.

Foreign companies doing business in the country are then advised to begin applying for a PAN.

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