handbook-tb

Adolfo Martín Jimenéz5.6 Administrative measures tailored to identify PEsFinally, identification of PEs may be a challenge for those administrationswith fewer resources. This means that, for less developed taxadministrations, the priority is probably to have rules that wouldpermit the early detection of PEs. In this connection, they may wishto consider implementing some of the following measures that wouldenable them to do so. For instance, India introduced, effective April2012, 136 annual reporting obligations for liaison offices (conductingauxiliary activities in India), which seek to obtain information about:(a) the activity in India of the foreign entity to which the liaison officebelongs and other entities of the same group operating in India (forexample, sales and purchases and services to and from India; details ofthe products sold and agents used by the group in India; identificationand activity in India of other companies of the same group or theirliaison offices; other group entities operating from the same premises);(b) the human resources used by the liaison office and those visitingit (for example, number of employees and salaries); and (c) clients andprojects located in India. The reporting form must be signed by thechartered accountant of the company in India or by the person soauthorized on its behalf by the non-resident person. Similar informationis to be provided to the Reserve Bank of India before setting up aliaison office. Developing countries may wish to consider establishingthis obligation with regard to foreign entities with a fixed place of businesswithin their territory that claim the benefits of Article 5 (4).Reporting obligations, penalties and liabilities, may also beestablished for clients and subcontractors of non-resident companiesclaiming not to have a PE in the source country in specific sectors thatare more vulnerable to tax avoidance (for example, large constructionworks and engineering projects, exploitation and exploration of naturalresources, and distribution of specific foreign products). These couldalso be applied to specific service providers to non-resident entities(maquilas, distributors, and so forth) and/or subsidiaries of foreign companies.The scope of these reporting obligations should be limited to theinformation that can be provided by those subjects and should be aimed136Notification No. 5/2012 of 6 February 2012. The author wishes toexpress his gratitude to D.P. Sengupta, Principal Consultant, National Instituteof Public Finance and Policy, New Delhi, for his assistance on this subject.404