1. Tax talk: Foreign workers in India must mention employer’s PF No.

Tax talk: Foreign workers in India must mention employer’s PF No.

Vishal Kumar, HR director with a multi-national company, was shocked to see a notice from the Provident Fund...

By: | Updated: October 28, 2014 2:25 AM

Vishal Kumar, HR director with a multi-national company, was shocked to see a notice from the Provident Fund (PF) office in relation to PF contribution for employees of the foreign group company. These employees were on assignment to India on short-term basis.

The notice had the names, nationality and passport numbers of these foreign nationals requiring the company to submit a response on the reasons for not making PF contribution in respect of these individuals. As per Vishal’s understanding, the details of these foreign nationals were never furnished by his company to the PF authorities.

Starting mid-September, Indian employment visa applications filed by the foreign nationals with Indian mission in their home country require the applicants to provide the Indian employer’s PF registration number. This would enable the PF authorities to track the compliance for foreign nationals more closely than before as the application for Indian visa is the first stage in which the information relating to foreign nationals visiting India is provided to the Indian authorities.

As per the PF laws, Indian entities with less than 20 employees are not required to register with PF office and, hence, are not required to contribute to PF. Foreign nationals, whose employment visas are being sponsored by these entities, can explain this fact to the Indian mission abroad.

Similarly, subject to certain conditions, Indian entities are not required to contribute to PF in relation to International Workers from countries with which India has Social Security Agreement (SSA). Also, under circumstances, few Indian entities that are sponsoring employment visas for the short-term assignees or employees of their business partners (such as clients and suppliers) may not be contributing to PF for these assignees/employees. In these cases, there may be a requirement to submit additional explanatory documentation to the Indian mission abroad along with the visa application.

This change is not an isolated move by the PF authorities. Though PF contribution for foreign nationals working in India (known as “International Workers”) was introduced in 2008, recently, PF authorities have started taking initiatives to track the compliance through the immigration procedures applicable to these foreign nationals. Foreigners Regional Registration Offices (FRROs), with whom foreign nationals coming to India on an employment visa are generally required to register after their arrival, has been one of the source through which PF authorities have been trying to enforce compliance. Earlier this year, the regional PF offices were told to coordinate with the FRROs and obtain the details of foreign nationals working within their region. In certain cities, during post-arrival registration of the foreign national, the FRROs have been obtaining undertaking from Indian employers that PF contributions would be made in respect of the foreign national.

With the numbers of foreign nationals on the rise, regulators are putting together a mechanism of cross-reporting and exchange of information among themselves to ensure compliance by these foreign nationals and the companies employing them.

These developments now require Indian companies to review the compliance for the foreign nationals employed by/ assigned to them. It will not be surprising if more Indian employers receive similar communications from the income-tax or PF departments as received by Vishal’s company.

Ralph Pinto

The writer is senior tax professional, EY. Views expressed are personal

Tags: Tax Talk
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