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Jan 15, 2026
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Tax department issues notices to 4–5 foreign digital firms over permanent establishment
The tax department has issued notices to as many as five large foreign digital companies, saying their activities in India meet the threshold of a permanent establishment (PE), sources aware of the development said.
These companies are preparing to contest the assessments, challenging them at the assessing officer level or before the Dispute Resolution Panel (DRP).
“Four to five large foreign digital companies have already received tax notices that their Indian operations are a permanent establishment. In some cases, assessments have already treated them as PE,” one of the sources cited above told Moneycontrol.
A permanent establishment refers to a fixed place of business through which a foreign company conducts its business in another country.
Under tax law and treaties, once a company is classified as having a permanent establishment in India, it is treated as having a taxable presence in the country. Indian tax authorities can attribute a portion of the company’s India-linked income to that establishment, deduct related expenses and tax the resulting profit.
At the core of the dispute is how broadly the concept of permanent establishment is interpreted in the digital economy.
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