PAN requirement for international taxation

A PAN is  unique alphanumeric identifier issued by  Indian Income Tax Department to individuals and entities for the purpose of taxation. While PAN is primarily used for the domestic tax purposes in India, it is also relevant in  context of the international taxation, particularly when individuals / businesses engage in the cross-border transactions or investments. 

How PAN is relevant in international taxation:

1. Reporting Income from International Sources:

   – If you  an Indian resident receive income from international sources, such as foreign employment, or foreign assets, foreign investments you are required to report  income in your Indian income tax return. You will need to provide your PAN when filing the returns.

2. Claiming the Tax Benefits under Double Taxation Avoidance Agreements 

   – India has entered into the DTAA agreements with several countries to prevent double taxation ofthe income. If you want to avail the benefits of DTAA, you may have to provide your PAN to claim lower withholding tax rates or exemptions on income sourced from the treaty countries

3. Compliance with Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS):

   – Indian financial institutions  require PAN information from account holders as the part of their compliance with FATCA and CRS, which are international agreements aimed at the sharing financial account information with foreign tax authorities.

4. Transfer Pricing Compliance:

   – Businesses engaged inthe international transactions with related parties are required to maintain documentation and comply with the transfer pricing regulations. PAN may be necessary for these compliance activities.

5. Opening a Foreign Bank Account:

   – Some foreign banks request  for PAN information when you open an account with them. This is most often part of their due diligence and compliance procedures.

6. Tax Credits and Avoidance of Double Taxation:

   – PAN is essential for the claiming foreign tax credits in India for taxes paid abroad to avoid  the double taxation on  same income.

while the PAN is primarily a tool for the domestic taxation in India, it plays a significant role in international taxation by facilitating  reporting and compliance of Indian residents and businesses engaged in and cross-border activities. It is important to ensure  your PAN details are accurate and up to date while dealing with international tax matters, as errors or discrepancies can lead to the complications in tax filings and compliance. If you have specific questions about how PAN relates to your international taxation situation, it’s advisable to consult with the tax professional or advisor with expertise in the  international tax matter.