October 2014 HR and tax alert India Indian employment visa application now requires Provident Fund registration number Executive summary The Indian Immigration authorities have advised that employment visa application forms are now required to include the Provident Fund (“PF”) registration number of the sponsoring Indian entity. in certain locations are confirming PF compliance during the post-arrival registration with Foreigner’s Regional Registration Office (FRRO) and again at the time of extension of the foreign national’s visa/ residential permit. This development in the effective exchange of information between Indian Immigration and PF authorities aims to improve compliance of ‘International Workers’ with PF regulations. At the time of registration, the FRROs in Chennai and Bangalore require the employer to confirm that PF contributions will be made in respect of the foreign nationals. Background The Provident Fund scheme in India is a method of saving for retirement. In October 2008 the laws around PF scheme contributions were changed. PF contributions were made mandatory for foreign nationals working in India (“International Foreign Workers”). Over the years, there has been an increased focus by the PF authorities on the compliance of Indian employers employing foreign nationals. To facilitate this, steps are being taken to increase the exchange of information between Indian immigration and the PF authorities. Currently, the Indian Immigration authorities Furthermore, when applying for an extension of an employment visa or residential permit, the FRROs in Bangalore and Chennai require foreign nationals to submit proof of having made the contribution to PF. If for any reason PF contributions are not being made, a suitable explanation should be filed with the FRRO at the time of registration or extension. Key changes From mid-September, the PF registration number of the sponsoring Indian entity is a requirement of online applications for Indian employment visas. This new requirement may not pose any immediate challenge for many Indian employers who are already registered with the PF authorities. EY | Assurance | Tax | Transactions | Advisory As per the PF laws, Indian enterprises with less than 20 employees are not required to contribute to the PF and therefore need not register with the PF office. Where foreign nationals are sponsored by this type of employer, an explanation can be given at the time of application for the visa. There is an exception from contributions for International Workers from countries with whom India has a Social Security Agreement. Similarly, in certain circumstances where the Indian entity sponsors the employment visas for short term visitors or employees of business partners (such as clients or suppliers) they may not be responsible for contributing to the PF for these employees. These entities will have to examine whether they are required to provide their PF registration number in the visa application form or whether they should provide a suitable explanation for not contributing to PF along with the application. Next steps Due to this increased information sharing, Indian entities sponsoring employment visas for foreign nationals should review their PF and tax compliance to ensure they are up to date. This will mitigate risk under the new PF and income tax laws and would also help streamline the immigration process. About EY EY is a global leader in assurance, tax, transaction and advisory services. 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Our performance and reward professionals help you design compensation programs and equity incentives that really engage your key people. We help you meet your executive tax compliance obligations, stay on top of regulatory change, manage your global talent effectively and improve your function’s strategic alignment. It’s how EY makes a difference. © 2014 EYGM Limited. All Rights Reserved. EYG no. DN0770 Sonu Iyer Tel: +91 11 4363 3160 Email: [email protected] ED None Amarpal S. Chadha Tel: +91 80 6727 5258 Email: [email protected] Surabhi Marwah Tel: + 91 11 4363 3167 Email: [email protected] Mayur Shah Tel: +91 22 6192 1104 Email: [email protected] This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. Alok Agrawal Tel: +91 80 6727 5073 Email: [email protected] 2 www.ey.com HR and tax alert