We are pleased to share with you our recent publication on – ‘US LLCs as Fiscally Transparent Entities Eligible for Treaty Benefits Under the India-US DTAA.’

As global markets expand, cross-border activities have increased significantly, bringing challenges such as double taxation and tax evasion. DTAAs play a pivotal role in addressing these issues by ensuring fairness and clarity in international taxation. A critical condition under Article 1 of these treaties is that benefits are typically available only to residents of the contracting states.

The Delhi Tribunal recently delivered an important judgment in the case of General Motors Company USA vs. ACIT, Circle International Taxation (ITA No. 2359/Del/2022), shedding light on the residency status of U.S.-based Limited Liability Companies (LLCs) under the India-USA Double Taxation Avoidance Agreement (DTAA).

In this case, the General Motors Company, a single-member LLC incorporated in the U.S., sought to claim the status of a U.S. resident to benefit from reduced tax rates under the DTAA. Specifically, the company intended to have its income taxed at 15% claiming the treaty benefit rather than the standard 25% rate applicable under Indian law. The central question revolved around whether the LLC could be considered "liable to tax" under Article 4 of the DTAA and thereby qualify as a "resident" being eligible for Tax treaty benefits under the India-US Tax Treaty.

We trust you find the same useful.