Jun 30, 2018
Can’t levy local taxes on MNCs using franchises, rules Income Tax tribunal
In what could bring relief to MNCs operating in the country using the franchise model, the Income Tax tribunal has ruled that such companies cannot be deemed to be located in India, meaning they don’t have a permanent establishment to be levied local tax rates. Giving its ruling in the case of Domino’s Pizza, the Mumbai bench of the Income Tax Appellate Tribunal held that the firm is a US-based company and cannot be subjected to Indian taxes.Permanent establishment, or PE, is a thumb rule used by the tax department while deciding whether a company can be taxed domestically and at what rate. The difference between tax rates for a domestic company and a foreign firm can be as much as 30%.