India - EY

1 Mobility: taxalertJuly 2017 IndiaExecutivesummaryOn 23 June 2017, the Employees provident FundOrganisation (EPFO) issued a revised circular clarifying itsposition on the definition of International Worker status forIndian employees. The circular states that Indian employeeswho return to work in India , after having worked in anothercountry with which India has a social security agreement,will not be considered as International Workers forProvident fund Workers are subject to mandatory ProvidentFund contributions on their full salary without any ceilinglimit and a higher allocation of contributions towards thePension Scheme (if they became a member of the ProvidentFund before 01 September 2014).It is not known whether the circular applies retrospectivelyor from the date of issue but employers should review theProvident fund returns and update/amend the status ofIndian outbound employees previously reported asInternational Workers who would now be considered asdomestic International Worker is defined as follows: A foreign national working in India for an employerregistered under the Indian provident fund .

2 An Indian employee who has worked or is going to workin a country with which India has a social securityagreement and being eligible to obtain thebenefitsunder the social security programme of that countryunder the social security totherequirements forInternational Workerstatusfor IndianemployeesAn Indian employeeworkingin a countrywhichhas a socialsecurity agreement with India and who obtains a certificateof coverage from the EPFO is generally exempted fromcontributing towards the social security programme of thatcountry. Therefore such an individual will not be regardedas an International , if such an individual does not obtain a certificateof coverage they will contribute to the social securityprogramme of the other country and may become eligiblefor benefits from that. Under an earlier interpretation, suchan Indian employee was considered as an InternationalWorker after returning to India from their Indian employee who works in a country which does nothave a social security agreement with India will not betreated as an International Worker.

3 Such individuals havealways been considered domestic International Worker who is an existing member of theProvident fund is subject to: Contributions towards the provident fund on their fullsalary without any ceiling limit; and A higher allocation of contributions towards thePension Scheme (if they became a member of theProvident fund before 01 September 2014).An International Worker who is not an existing member ofthe provident fund was previously required to become amember of the provident fund on their return to work inIndia and subject to the rules above for : tax alert2EY| Assurance | Tax | Transactions | AdvisoryAbout EYEY is a global leader in assurance, tax,transaction and advisory services. The insightsand quality services we deliver help build trustand confidence in the capital markets and ineconomies the world over. We developoutstanding leaders who team to deliver on ourpromises to all of our stakeholders. In so doing,we play a critical role in building a betterworking world for our people, for our clients andfor our refers to the global organization, and mayrefer to one or more, of the member firms ofErnst & Young Global Limited, each of which is aseparate legal entity.

4 Ernst & Young GlobalLimited, a UK company limited by guarantee,does not provide services to clients. For moreinformation about our organization, please & Young LLP is a client-serving memberfirm of Ernst & Young Global Limited operatingin the US. 2017 EYGM Rights no. 04081-173 GblED NoneThis material has been prepared for generalinformational purposes only and is not intendedto be relied upon as accounting, tax, or otherprofessional advice. Please refer to youradvisors for specific of the latest circularThe latest circular issued by the EPFO dated 23 June 2017 (replacing the circularissued on 8 June 2017) states that an Indian employee who qualifies as anInternational Worker and returns to work in India will be deemed to be anemployee and not an International Worker. Therefore such an individual will beconsidered to be a domestic worker on their return to to a previous circular dated 20 January 2016 issued by the EPFO: provident fund contributions are required where the salary is either paid orpayable by the Indian employer.

5 If salary is neither paid nor payable out of the books of the Indian employer,then provident fund contributions are not both the circular dated 23 June 2017 and the circular dated 20 January 2016, an Indian outbound employee , who has worked in a country withwhich India has a social security agreement, will not be considered as anInternational Worker on returning to India from an assignment if they meet thefollowing conditions: They were on the payroll of the host employer while on assignment; They did not contribute to the Indian provident fund scheme while onassignment; They did not obtain a certificate of coverage from the EPFO; and They contributed to social security scheme of the host country and are eligiblefor benefits from that , no provident fund contributions are payable in India when the employee ison assignment if there is no salary paid or payable by the Indian stepsThe latest circular from the EPFO may impact how organisations plan for Indiaoutbound assignments to countries with which India has entered into socialsecurity circular might bring relief to Indian outbound employees sent on assignmentto a country with which India has a social security agreement without continuingcoverage under the Indian provident fund scheme.

6 Such Indian outboundemployees will now not be considered as International Workers on return to is essential that employers with Indian outbound employees to countries withwhich India has a social security agreement: Review the status of provident fund compliance in respect of India outboundemployees. Review the provident fund returns and update/amend the status of Indiaoutbound employees previously reported as International Workers who wouldnow be considered as domestic workers. Review the terms of assignment which apply for India outbound remains to be confirmed whether the latest circular will apply retrospectively oronly from the date of Social Security ServicesMike KenyonTel: +44 (0)20 7951 2583 Email: ChandlerTel: +44 (0)20 7951 1280 Email: IyerTel: +91 11 4363 3160 Email: S. ChadhaTel: +91 80 6727 5000 Email.