{"id":923,"date":"2016-01-06T11:24:41","date_gmt":"2016-01-06T11:24:41","guid":{"rendered":"https:\/\/sunkrish.com\/?p=923"},"modified":"2017-02-12T09:55:33","modified_gmt":"2017-02-12T09:55:33","slug":"government-extends-tax-residency-rule-place-of-effective-management","status":"publish","type":"post","link":"https:\/\/sunkrish.com\/index.php\/2016\/01\/06\/government-extends-tax-residency-rule-place-of-effective-management\/","title":{"rendered":"Government extends tax residency rule – Place of Effective Management"},"content":{"rendered":"

\"\"<\/a>A deadline for comments on the draft guidelines to determine the tax residency of a foreign company has been extended to January 9.<\/p>\n

The government felt the need to determine a company\u2019s place of effective management due to lack of detail in the Income Tax Act leading to the possibility of tax avoidance.<\/p>\n

\u201cRepresentations requesting for extension of the last day for submitting comments and suggestions, have been received and considered,\u201d according to a government statement announcing the extension of the deadline for comments on the issue, earlier slated for January 2.<\/p>\n

The Place of Effective Management (POEM) of a company, as the concept was called, was introduced in the Finance Act, 2015 to determine the tax residency of a foreign company.<\/p>\n

The draft guidelines for what defines a company\u2019s place of effective management, released on December 23, defines the POEM as \u201ca place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance made.\u201d<\/p>\n

\u201cSection 6(3) of the Income-tax Act, 1961, prior to its amendment by the Finance Act, 2015, provided that a company is said to be resident in India in any previous year, if it is an Indian company or if during that year, the control and management of its affairs is situated wholly in India. This allowed tax avoidance opportunities for companies to artificially escape the residential status under these provisions by shifting insignificant or isolated events related with control and management outside India,\u201d according to draft guidelines issued by the Central Board of Direct Taxes.<\/p>\n

\u201cAs per the amendment brought in by the Finance Act, 2015 a foreign company will be regarded as a tax resident of India, if its POEM in that year is in India,\u201d according to a report by Deloitte and CII.<\/p>\n

According to the Deloitte report, there is ambiguity around some of the provisions in the guidelines, such as the duration for which a company has India as a place of effective management. \u201cA question may still arise that for a foreign company to be resident in India, is it necessary that the POEM should be situated in India throughout the financial year under consideration or mainly in India.<\/p>\n

Similarly, the term \u201ckey management and commercial decisions\u201d in the definition of POEM seems to be causing some confusion.<\/p>\n

\u201cUnlike, for instance, the UK, India does not define the term \u2018key management and commercial decisions\u2019 and therefore these are undefined and subjective.<\/p>\n

In the UK, judicial precedents and tax rules lay emphasis on whether directors\/officers taking major decisions are independent, are empowered to take these or whether such directors\/officers are acting under the influence or direction of shareholders,\u201d Mr.Alex Postma, Leader\u2013Global and EMEIA International Tax Services, EY had said in a note.<\/p>\n

Enterprises have become increasingly mobile and technology and connectivity are as important as never before in their global competence. This poses risks that a travelling executive may create significant unforeseen tax burdens in India,\u201d Mr. Postma added in his note.<\/p>\n

Source: http:\/\/www.thehindu.com\/business\/Economy\/government-extends-tax-residency-rule-deadline\/article8055070.ece<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

A deadline for comments on the draft guidelines to determine the tax residency of a foreign company has been extended to January 9. The government felt the need to determine a company\u2019s place of effective management due to lack of … Continued<\/a><\/p>\n","protected":false},"author":1,"featured_media":3584,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15,4,497,491],"tags":[305,294,915,295,300,352,313],"class_list":["post-923","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-corporate-business-advisory-services","category-financial-corporate-services","category-cross-border-transactions-mas-joint-ventures","category-income-tax-e-filing-of-returns-for-individuals-partnerships-companies","tag-economy","tag-investment","tag-tax-residency","tag-taxation","tag-transfer-pricing","tag-uk","tag-us"],"_links":{"self":[{"href":"https:\/\/sunkrish.com\/index.php\/wp-json\/wp\/v2\/posts\/923","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sunkrish.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sunkrish.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sunkrish.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/sunkrish.com\/index.php\/wp-json\/wp\/v2\/comments?post=923"}],"version-history":[{"count":7,"href":"https:\/\/sunkrish.com\/index.php\/wp-json\/wp\/v2\/posts\/923\/revisions"}],"predecessor-version":[{"id":3996,"href":"https:\/\/sunkrish.com\/index.php\/wp-json\/wp\/v2\/posts\/923\/revisions\/3996"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/sunkrish.com\/index.php\/wp-json\/wp\/v2\/media\/3584"}],"wp:attachment":[{"href":"https:\/\/sunkrish.com\/index.php\/wp-json\/wp\/v2\/media?parent=923"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sunkrish.com\/index.php\/wp-json\/wp\/v2\/categories?post=923"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sunkrish.com\/index.php\/wp-json\/wp\/v2\/tags?post=923"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}