India rules secondment of employees does not create a PE

On 31 July 2025, the Delhi Income Tax Appellate Tribunal (ITAT) issued its ruling in ITA No. 1407/Del/2025, examining whether the secondment of employees from Japan to India created a Permanent Establishment (PE). In the case, a Japanese company had seconded certain employees to its Indian subsidiary. The secondees were physically present in India and worked entirely under the day-to-day supervision and control of the Indian entity.

The Indian tax authorities argued that the secondment effectively meant the Japanese company was carrying on business in India through its subsidiary, thereby giving rise to a Fixed-Place PE. According to the authorities, the secondees were representing the business interests of the Japanese company, and their activities should therefore be attributed to the foreign enterprise.

The ITAT disagreed. It emphasized that the secondees were fully integrated into the operations of the Indian subsidiary and operated solely under its direction, not under the control of the Japanese parent. The Indian entity's reimbursement of the secondee's salaries reinforced this conclusion. Crucially, the Tribunal highlighted that the Japanese company did not have any premises or facilities "at its disposal" in India. On this basis, it held that no PE was established.

Dutch Tax Authority clarifies treatment of passive rental of foreign real estate under Pillar Two

On 18 June 2025, the Dutch Tax Authority published a "Knowledge group" position on whether the passive rental of foreign real estate to third parties could constitute a PE under the Dutch Minimum Tax Act 2024 (Wmb 2024). The case involved a group entity deriving rental income from immovable property located abroad, with the activity limited to making the property available and providing no additional services.

The Dutch Tax Authority confirmed that under the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention, such passive rental does not give rise to a PE, as no business is carried on through a fixed place at the disposal of the enterprise. The question was whether the broader definition in the Wmb 2024, designed to capture situations not covered under treaty concepts, could nevertheless apply. The Dutch Tax Authority concluded that it would not, because passive rental does not meet the characteristics of a "place of business" absent operational activity, personnel or infrastructure linked to the property.

Accordingly, the Dutch Tax Authority determined that the passive rental of foreign real estate to unrelated third parties does not create a PE under either the OECD Model Convention or the Wmb 2024.