Master Card Asia Pacific Pte Ltd (AAR Delhi)
Determination of Permanent Establishment and other connected issues
Issue- Whether the Applicant has a permanent establishment in India as regards the use of a global network and infrastructure to process card payment transactions for customers in India and as regards other related issues?
Held– The AAR has held that digital and other connected equipments can, depending on the business model, determine the formation of a permanent establishment of a non-resident enterprise in India. There are also other related issues which will have ramifications on the methodology of conducting business in India.
FACTS OF THE CASE:
MasterCard Asia Pacific Pte Limited (the Applicant), is one of the leading global payment solution providers facilitating financial institutions, businesses, merchants, cardholders and governments worldwide, to use electronic forms of payment.
The Applicant is the regional headquarters for Asia Pacific, Middle East and Africa (APMEA) region. It carries out the MasterCard group’s principal business of transaction processing and payment related services under a family of products including ‘MasterCard’, ‘Maestro’ and ‘Cirrus’ in the APMEA region.
The MasterCard Business is structured as an open bankcard association, in which the cardholder and merchant relationships are managed principally by the Applicant’s customers which are primarily banks and financial institutions (Customers) in APMEA region. The Applicant does not issue cards, extend credit to cardholders, set cardholder fees or determine interest rates or fees charged to cardholders using MasterCard products.
The services are provided by the Applicant to APMEA customers pursuant to Master License Agreements (MLA), which the Applicant signs with each and every customer in the APMEA region. The Applicant charges its customers transaction processing fees relating to authorization, clearing and settlement of transactions, consequent to the terms of a MLA.
The transaction processing activity consists of electronic processing of payments between banks of merchants (acquirer bank) and banks of cardholders (issuer bank) through the use of MasterCard Worldwide Network (the MasterCard Network). This network facilitates authorization, clearing and settlement of payment transactions between Customers on a proprietary, global payment system. The Network links issuer banks and acquirer banks around the globe for transaction processing services and through them permits MasterCard Cardholders to use their cards at millions of merchants worldwide.
In provision of its services, the Applicant provides a customer with a MasterCard Interface Processor (MIP) that connects to the MasterCard Network and processing centers. An MIP is about the size of a standard personal computer and is placed at the customers’ locations in India. It is through the network and processing centers outside India that the Applicant is able to facilitate the authorization, clearing and settlement of payment transactions.
The Applicant has a subsidiary in India, namely MasterCard India Services Private Limited (MISPL), in which it owns 99% of the shareholding. The remaining 1% is held by the Applicant’s immediate holding company, MasterCard Singapore Holding Pte Ltd. MISPL owns and maintains the MIPs placed at the customers’ locations in India.
The Applicant approached the Authority of Advance Ruling (AAR) seeking clarification on the following issues:
