Amazon Web Services Inc. (AWS) is a cloud services provider selling cloud computing services in India.
In 2023, Indian tax office issued an order that income earned by AWS on cloud computing services provided to Indian clients amounted to royalty and fees for included service and therefore taxable. Thus, the sum of $147 million was determined as the income chargeable to tax for the respective years.
AWS contested such order in a tax tribunal and won. Subsequently, the tax office appealed against this decision to the Delhi High Court which in its landmark ruling said that AWS’s services provided in India do not involve royalties or fees that qualify for taxation under the India-US double taxation avoidance treaty. Thus, it rejected India’s tax office effort to collect tax on $147 million of AWS’s income.
Other foreign technology companies that offer cloud services in India welcome this positive court decision since they received similar tax demands from tax authorities in India for their income to be taxed. Now they will benefit from AWS win.
Furthermore, Delhi High Court ruling would most probably also apply to companies based in other countries such as the UK and Canada, that have tax treaties with India containing similar definitions of royalties and fees for technical services.
However, it is not over yet, stakes cannot be higher, so it remains to be seen whether the India tax office will appeal against the above decision to the India Supreme Court and the saga will continue. We will update you in due course.
Doing business and/or have assets in several countries and want to minimise your tax liability in truly interconnected way to avoid unnecessary taxation? Call us (+442039741244) or write us at anytime (office@bensonformations.com).
