US Companies Face Heavy Taxes Allowing H-1B Workers Remote from India, Experts Warn
Amazon’s recent decision to allow its H-1B employees in India to work remotely has raised significant concerns among tax experts. They warn that US companies could face substantial tax liabilities if this practice continues, as the duration of the remote work situation remains uncertain.
Background on H-1B Worker Visa Issues
Since November 2022, thousands of H-1B workers have found themselves stranded in India. Many traveled there to obtain visa stamping, only to discover that their interview appointments had been postponed until 2026. This delay was caused by a new social media vetting procedure mandated by the State Department.
The implementation of this vetting process began on December 15, 2025, significantly affecting Indian visa applicants. As a result, many individuals with scheduled interview dates in January and February 2026 received notifications stating their appointments had been further delayed into 2027.
Implications for US Companies
Experts emphasize the potential tax implications for US companies that allow these employees to work remotely from India. Parizad Sirwalla, a tax expert from KPMG India, points out that permitting prolonged remote work could establish a “permanent taxable entity” in India.
- If a permanent establishment (PE) is established, the company will incur Indian taxation and reporting obligations.
- Employers must carefully evaluate the tasks assigned to workers while they are situated in India.
This situation creates a dilemma for employers. They may consider terminating these employees to avoid tax complications. However, doing so could lead to considerable costs. Companies would need to pay around $100,000 for new H-1B visa applications if they are unable to bring back the existing workers.
Tax Treaty Considerations
Fortunately, there is a US-India tax treaty in place since 1989, designed to prevent double taxation. According to this treaty, a US firm is only taxed in India if it is deemed to have a permanent establishment there. However, defining what constitutes a PE is ambiguous, leaving room for interpretation.
Experts caution that any involvement of US employees working in India could trigger the risk of a permanent establishment, placing companies in a precarious position. This situation demands that businesses proactively manage and understand the tax landscape involving remote workers in foreign countries.
