22/05/2013
Royalty payments to face queries on beneficial owners
The government has quietly made a rule change that could in most cases deny the benefit of lower tax rates under bilateral treaties to Indian companies, when it comes to payment of royalty and technical services fee to overseas firms.Thanks to a less-talked-about clause in the Finance Act, 2013, these overseas payments routinely made by Indian firms might be deprived of the concessional tax rate of 10-15% guaranteed under treaties as the taxman would raise questions of who the real beneficiary of the payment is.Finance minister P Chidambaram hiked the rate of tax on royalty and fee for technical services paid to overseas entities in Finance Act 2013-14 to 25% from the earlier 10%. This has made it even more compelling to companies such as Nestle India,
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20/05/2013
Guidance note on advanced pricing pacts issued
The Central Board of Direct Taxes (CBDT) has come out with a comprehensive guidance note with frequently asked questions on advance pricing agreements (APAs).This will be a handy guide to the potential APA applicants as it provides practical insights to the approach, process and expectation of the APA office.An APA is an agreement between a taxpayer and tax authorities on the transfer pricing method and rate applicable to taxpayers’ inter-company transactions.India had introduced APA provisions in the income tax law from July 1 last year.The CBDT had come out with the rules for the APA programme in August last year.
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17/05/2013
Money laundering issue: Mauritius' tax info exchange pact with India ready
Mauritius today said that a new Tax Information Exchange Agreement (TIEA) with India has been negotiated and is ready to be signed.
The pact would help the two countries exchange information on tax matters of the entities doing business in the two countries, the African island nation's Finance Secretary Ali Mansoor said.
Besides, the two countries are working on a new DTAA (Double Taxation Avoidance Agreement) and progress has been made on various fronts, he said.
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16/05/2013
Transfer price notices receive AG’s approval
Attorney general GE Vahanvati has endorsed the finance ministry’s recent moves slapping income tax demands on companies for alleged undervaluation of shares in cross-border deals, saying the department was within its rights to scrutinise such transactions for violation of transfer pricing (TP) rules.Shell India, the Indian arm of Royal Dutch Shell that received a $1-billion tax demand for alleged undervaluation of its shares while raising money from its global parent, had said earlier the move had no basis in law.
The development assumes significance as around 27 such deals are under the department’s scanner including Shell India and Vodafone.According to sources, the AG’s legal opinion, which was sought by the law ministry in March, has been sent to the finance ministry, which wanted to know the legality of transfer pricing laws in such cases. Finance minister P Chidambaram has already approved the AG’s report, it is learnt.
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07/05/2013
Nokia invokes MAP to resolve Rs 2,000-cr tax problem
Finland-headquartered Nokia has invoked the mutual agreement procedure (MAP) under the India-Finland Double Taxation Avoidance Agreement, to resolve the Rs 2,000-crore tax dispute with the Indian tax department.
Now, the competent authorities of the two countries — India and Finland — will sit at the negotiating table and decide how the dispute should be resolved.MAP is an alternative available to taxpayers for resolving disputes giving rise to double taxation.
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27/04/2013
Arm's length tolerance band lowered to 1-3%
A variation of more than eight per cent in 'arm's length' transactions between two related parties could now lead to transfer pricing adjustments.The finance ministry has lowered the 'tolerance' band for accepting an arm's length price paid by an assessee to eight per cent for FY13 from nine per cent earlier. For wholesale traders, the band is even lower at one per cent of the transaction price. In other words, if the variation between the actual price of the transaction and the arm's length price does not exceed one-three per cent of the actual price, then no adjustment would be made by the tax department.
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22/04/2013
Tax treaty with Mauritius back to the drawing board, says FM P Chidambaram
Finance minister P Chidambaram has said the government has not made any progress in renegotiating a contentious tax treaty with Mauritius and that the tax-related travails of MNCs such as Vodafone, Nokia or Shell made more news in India than abroad.Speaking to ET after wooing investors in Toronto, Ottawa and Boston, Chidambaram asserted that the government will last its full term and would pursue significant economic reforms over the next 12 months.
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16/04/2013
End of tax treaty with India to hit Mauritius: IMF
End of Mauritius' tax treaty with India could have a high impact on the island nation, a staff study of the International Monetary Fund (IMF) has warned, explaining the country's reluctance to renegotiate the lucrative treaty it has with New Delhi. India has been trying for many years to persuade the country to renegotiate the Double Taxation Avoidance Convention (DTAC) between the two nations, but has been unable to lean too hard because of strategic reasons. Nearly 40% of India's foreign direct investment comes from Mauritius, much of which is third-country investment routed this way to take advantage of the tax treaty.
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14/03/2013
India-Mauritius narrow down differences on DTAA
India and Mauritius have narrowed down their differences on matters related to the three-decade-old Double Tax Avoidance Agreement (DTAA) and all contentious issues will be resolved in the next meeting of the Joint Working Group in April. "Two round of meetings of the JWG have already taken place and the third round of the JWG will take place soon. We have narrowed down the areas of divergence. The next meeting has been fixed for sometime in April to resolve issues which will be beneficial and acceptable to both sides," President Pranab Mukherjee told reporters accompanying him on his return from a three-day state visit to Mauritius. Asked whether there was any common ground on DTAA, he said unless those issues are resolved, one has to wait.
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13/03/2013
Resolution on DTAA with India likely by April
India and Mauritius are working to find solutions to their differences on Double Taxation Avoidance Agreement (DTAA) and the issue could be resolved by April, when the two sides meet in New Delhi.Mauritius Prime Minister Navinchandra Ramgoolam said he had discussed the issue of DTAA with visiting President Pranab Mukherjee during delegation-level talks held here on Tuesday."We spoke about the Double Taxation Avoidance Agreement. We have already found some common ground to find a solution. This is going to come to an end in April," he said in the presence of President Mukherjee after attending a ceremony where several pacts on health, medicine, tourism were signed.The India-Mauritius Joint Working Group met in December, 2011, and again in August, 2012, to discuss concerns on the operation of the India-Mauritius Double Taxation Avoidance Convention.
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