Strategizing International Tax Best Practices – by Keith Brockman

The 2015 Indian Budget has been recently presented, with highlights referenced in a link for the PwC Tax Insights article.

http://www.pwc.com/en_US/us/tax-services/publications/insights/assets/pwc-india-budget-2015-defers-gaar-addresses-offshore-transfers.pdf

Key points:

  • GAAR deferment until 1 April 2017.
  • Clarification” of rules addressing offshore share transfers, including reporting requirements.
  • 5% reduction in corporate income tax rate (30% to 25%), phased in over 4 years, after current year 2% surcharge increase.  
  • “Place of effective management” concept, accepted by the OECD, is introduced, noting that a foreign company will be resident in India if its place of effective management is in India at any time during the year.  Guiding principles are to be issued.
  • Tax rate for royalty/technical services reduced to 10%.

The GAAR deferment is especially welcome, hopefully adding more certainty and objective determination upon final implementation.  The rate reductions and additional clarification for offshore share transfers also are positive signs for tax reform, although offset by application of a “place of effective management” concept that will hopefully be addressed simply and objectively without enduring years of appeals to obtain a definitive conclusion.

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