Assessing the Tax and Regulatory Impact of Expatriate Secondment in India

Deploying expatriates in India may lead to many tax and compliance requirements

- ASHISH KARUNDIA

The integration of multinational corporations into emerging economies has led to a marked increase in the cross-border movement of people. The individuals involved in such movements are referred to as expatriates, viz., persons residing and working temporarily in a foreign country while retaining citizenship of their home country.

When these people are temporarily assigned from a foreign parent/group company to an Indian subsidiary or associated entity, the process is termed as a secondment.

The movement of people can be inbound—i.e., a person based in a home country (say Denmark) working in a host country (say India)—or outbound, i.e., a person based in a home country (say India) working in a host country (say Denmark). These assignments are usually driven by business needs, knowledge transfer, or cost efficiency, and can be short-term or long-term.

The seconded employee generally remains on the payroll of their original employer throughout the secondment period. However, in certain situations, MNCs follow a split payroll—part of the payment is done by the host entity and the balance is paid by the home entity. Regardless of the duration, such international movement brings with it a complex web of legal and regulatory obligations in the host country.

In the hands of employees: personal income tax