Treat software payments to MNCs by arms as royalties: Developing countries tell UN tax committee

Is money paid by Indian arms of software multinationals to their parents, royalty? India’s stand that software fees have to be part of royalty under tax treaties was presented at the United Nation recently and could lead to change in some of the tax treaties.

The U.N. model tax convention subcommittee was hearing a case as to whether payments for software from a country to its parent could be taxed at source. Many countries including India want to expand the definition of royalty to include software payments.

The Indian tax department has been pushing for this for a while now but multinationals are protected by tax treaties. Under India’s tax treaties with other countries, software payments are not part of the royalty.