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Who should foot the bill? Parent or the Subsidiary?

For a lot of multi-national corporations, India is their base for one of more of the below:

1/ Low-risk service provider

2/ Low-risk manufacturer

3/ Low-risk distributor

COVID has brought out additional operational expenses to such low-risk counterparts in India, it can be as simple as providing infrastructure for employees to work from home. Indian entities who operate in wafer-thin margins are expected to absorb these costs.

Which means that these entities

+ Might have to incur losses or even utilize their reserves to stay afloat.

+ Have to renegotiate the margins, which would be hard since the Parent companies are also affected by the pandemic and would be looking to bring their costs down.

While the international taxation principles suggests that the HQ, entities taking critical decisions to bear the cost of such key decisions. The way the relationships between entities are modelled is making it hard for Indian counterparts to operate profitably.

What do you think? Leave a comment


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