Budget 2016: International Tax Amendments

This budget has incorporated some significant changes with respect to the international taxation like MAT relief, Equalization levy etc. Lets see some of the important amendments

1. No MAT on Foreign Companies: MAT on Foreign companies was a very disputed area in which there were several High court rulings, CIT rulings where in the respective authorities levied MAT on foreign & also exempted. In this budget Government made it clear that where a Foreign Company who does not have a PE (Permanent Establishment) in India & with whom India has DTAA need not pay MAT. In all other cases the foreign company has to pay MAT.

2. POEM deferment: It is proposed to Provisions related to POEM (Place of effective management) will be deferred till 01/04/2017.

3.Equalization levy: It is proposed to impose a levy of 6% called Equalization levy for any online advertising services or any other service for the purpose of online advertisement received by a Non resident not having a PE from Resident Indian. This is one of the biggest tax changes which has been brought mainly due to comply with the BEPS provisions of OECD. Equalization levy is only applicable if the services received by the Resident Indian is more than Rs 1 lakh.

4. Country By Country Reporting: The OECD had come out with the Country by Country Reporting format for MNC’s to disclose the amount of tax paid by them in all the countries & in respective jurisdiction. To comply with the same the Budget has made some amendments to implement the Country by Country Reporting for MNC’s. The Budget has proposed a strict penalty for non furnishing of Country by country Report.


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