New Delhi: In an attempt to bring shell companies set abroad under tax net, finance ministry on Tuesday listed new tax rules requiring foreign firms to pay taxes if the effective control of business, management decisions and majority of board meetings take place within the country.
The final guidelines for Place of Effective Management (PoEM) for determining the place of effective management of a company for taxation was issued by the finance ministry on Tuesday.
It said that the intent of these guidelines is not to target Indian firms which are engaged in business activity outside India. “The intent is to target shell companies and companies which are created for retaining income outside India although real control and management of affairs is located in India,” the ministry said.
It added that these guidelines are not intended to cover foreign firms or to tax their global income, merely on the ground of presence of permanent establishment or business connection in India.
It will be effective from April 2016 and will apply from AY 17-18 onwards.
As per the principles, it defines a 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.
