USA Paying a foreign employee or employee of parent company from subsidiary

Dec 16, 2012
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My question pertains to 2 countries accounting and taxation systems.

Company A based in India is the parent company.
Company B based in US is subsidiary by way of share holding by company A.

What we would like to do: (listed below are 3 possible options we came up with, but not sure how to account for it in our accounting and what are the taxation issues we will face in the 2 countries applicable):
Pay an Employee based in India, Salary and expenses. Payments to be disbursed by US company sine the activities are mostly performed for company B.

OPTION 1: Pay Directly from company B, by International wire of salary and expenses and record as such. What are the tax implications for both countries?
OPTION 2: Have employee invoice us as a service provider / vendor and pay invoice. This would probably require company registration, company tax ID registration, etc. for individual in country of operation (INDIA)
OPTION 3: Pay employee via parent A based in India and reimburse parent A for expenses by either accouting methods or invoicing. What are the tax implications of this in both countries?

What we would like to know:
Tax implications in both countries
Viability and possibility of options and how to implement it correctly
Additional options if any.

I would appreciate your response in this matter.

Thank you.


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