• Hiring existing foreigner employee under Indian subsidiary

Dear Sir/Madam,

We are based at Thailand and we have offices across India & other countries. 

In India we have formed Private Ltd subsidiary company as we are planing for constructing manufacturing unit at Maharashtra. We want to transfer employees for more than 2 years from Thailand to India, this employees are THAI by origin. This two employees are technically qualified engineers who will be working on construction of manufacturing unit in India.

Since, this 2 employees are paid as per Thailand norms in home country but when they start working in India they will be paid salary with statutory deductions as per Indian norms i.e. PF & PT etc. This 2 employees will be staying in company provided accommodation and travel by company provided car. 

I have question whether we have to issue separate appointment letter under newly formed Indian subsidiary or we have to issue transfer or deputation letter to them from Thailand company. They will paid salary in Thailand as a social security as well as salary in India. 

India and Thailand are having DTAA (Double Taxation Avoidance Agreement) so they will be benefited under this scheme.

Please advise whether I should issue appointment letter under new subsidiary formed in India. I am working as Manager - HR for Indian company.

Please help me for gaining my knowledge in aforementioned matter.

Thanks
Indrajeet S.
Asked 4 years ago in Labour

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13 Answers

Yes to pay them salary as in India and make deductions, you will have to show them as employee in India and hence have to issue appointment letter from Indian company as well. 

 

 

Atulay Nehra
Advocate, Noida
1308 Answers
58 Consultations

5.0 on 5.0

You should issue appointment letter under new subsidiary formed in India for Thai employees 

Ajay Sethi
Advocate, Mumbai
94522 Answers
7485 Consultations

5.0 on 5.0

Hi

Do their documentation as the deputed employees for a time period of 2 yrs.

As they are employees of the Thiland based company and are coming here for the specific time period to represent the company only.

So, Deputation

Thanks

Rahul Jatain
Advocate, Rohtak
5365 Answers
4 Consultations

4.8 on 5.0

They will send on deptudtion. No need to follow Indian payment norms as above 15000rs salary per month, PF deduction is not compulsory in India. And payment is made by and in Thailand only. So local Indian law has no application.

They will be subject to follow directions of Indian managemnet but their mother employer is Thai company only.

Yogendra Singh Rajawat
Advocate, Jaipur
22596 Answers
31 Consultations

4.4 on 5.0

Separate letter of appointment after convening transfer formality from Thailand. Yes they will definitely benefit

Prashant Nayak
Advocate, Mumbai
31807 Answers
175 Consultations

4.1 on 5.0

Dear sir,

You are not required to issue separate appointment letter for the subsidiary company, rather you may issue deputation or transfer later from the main company to subsidiary company. 

Ganesh Singh
Advocate, New Delhi
6757 Answers
16 Consultations

4.5 on 5.0

If the deputed employees are still the employees of the parent company hand have been deputed work in India for a certain period of time and the other service conditions remain as per your company's rules and regulations, then you do not have to issue them with a fresh appointment letter to work in India.

You can get an agreement entered with them on the basis of the conditions and terms you may impose on them for this purpose so that your company nor they will incur any loss on this account for any reason in future.

 

You can consult your parent headquarters at Thailand for all such clarifications because if they have terminated them or have deputed them then you may take decision accordingly.

T Kalaiselvan
Advocate, Vellore
84711 Answers
2172 Consultations

5.0 on 5.0

hi,

Nothing special you have to do.

just make a contract with them in India that for the period of two year  you to be in india base subsidiary company and you will be paid salary in INR i.e so and so... and you wont be given any extra benefit like PF and etc.

that it. dont make it complex. 

Atul Shahi
Advocate, Allahabad
160 Answers
1 Consultation

4.6 on 5.0

1. See since they are deputed to overlook the work and not started working or on payroll of Indian company a deputation transfer letter with all terms can be issued by the Thai company. Also in case you want them on Indian company payroll then a transfer letter can be issued and new contract can be signed.

Shubham Jhajharia
Advocate, Ahmedabad
25514 Answers
179 Consultations

5.0 on 5.0

1. You can send the employees to India on deputation or provide new appointment letter from subsidiary in India. 

2. The salary to be disbursed in INR the taxation of salary will be according to Indian laws till they are on deputation in India. 

Mohit Kapoor
Advocate, Rohtak
10687 Answers
7 Consultations

5.0 on 5.0

I would advise you to give them fresh appointment letters/contracts on behalf of the Indian subsidiary.

Please allow me to explain. Allowing the seconded employees to work under the terms of their employment with the original employer, i.e., the Thai parent company, could lead to the creation of a Service Permanent Establishment in the eyes of the law. When that happens it brings additional tax burden (read: double taxation) for the foreign company regardless of any DTAAs, thereby defeating the whole purpose. You want the two companies, the Thai parent and its subsidiary, to be seen as two distinct companies.

Further, as you are going to give them statutory benefits under Indian laws you shouldn’t have a problem giving them fresh appointment letters from the Indian subsidiary. 

I hope that answers your question. Follow-up queries welcome.

Pulkit Chandna
Advocate, New Delhi
208 Answers
5 Consultations

4.9 on 5.0

You can hire the services of the said employee under Indian Subsidiary.

Further, offer / appointment letters to be given under the New Indian Subsidiary which will be formed, after completing the transfer formalities from Thailand to Indian Subsidiary.

S Srinivasa Prasad
Advocate, Hyderabad
2876 Answers
9 Consultations

5.0 on 5.0

  1. As per the information mentioned in the present query, makes it clear that there has been no mandate norms and procedure to be adopted to get the benefit of the above said tax claims.
  2. I would like to apprise you that you can either go for the new appointment letter with the mentioning about the previous working scenario or transfer letter also with mentioning of the previous and future norms to be followed.
  3. Rest, would like to research more on it including the case laws as soon as possible.

Sanjay Baniwal
Advocate, South Delhi
5473 Answers
13 Consultations

5.0 on 5.0

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