9/20/2016

PlaceofEffectiveManagementrulesdeferredforaccountingease:Govt|VCCircle

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Thursday,March3,201606:30IST

PlaceofEffectiveManagementrules
deferredforaccountingease:Govt
Advertisement

BudgethaddeferredtherulesbyoneyeartoApril2017.
BYPTI

Reuters

RevenueSecretaryHasmukhAdhia

Therulesfordeterminingplaceofeffectivemanagementofacompanyhavebeendeferred
tillApril2017soastogivecorporatessufficienttimetoprepareaccountsaccordingtotheir
placeofresidencyunderthenewnorms,FinanceMinistrysaidtoday.
PlaceofEffectiveManagement(PoEM)rulesfordeterminingtheplaceofeffective
managementofacompany,withaviewtoassessitstaxliability,wastocomeintoeffectin
thecurrentfiscal.However,thefinalguidelineisyettobeputinplacebytheCBDT.
"SincethisFinanceBillwillgetpassedbymiddleofMay,weshouldnotideallyintroduce
PoEMonthedatewhichisnotbeginningoftheyear.Sothatiswhywearepostponing
PoEM,"RevenueSecretaryHasmukhAdhiasaidattheIVCAevent.
HesaidstakeholdershaveraisedconcernsthatifPoEMisimplementedinlaterpartofany
fiscalyear,thencertaintaxpayerswouldbefoundtohavefloutedrulesofpayingadvance
taxandTDSsincethebeginningofyear.

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"Thiswasafairpoint.SowehavetomakelegislativechangesthisyearinFinanceBillwhich
saysthatifacompanyisconsideredresidentunderPoEMguideline,theywillnothave

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9/20/2016

PlaceofEffectiveManagementrulesdeferredforaccountingease:Govt|VCCircle

obligationofTDSandAdvanceTaxforthatyear.Sothisisthechangewehavebroughtout
ABOUT VCCEDGE TECHCIRCLE INFRACIRCLE EVENTS TRAINING AWARDS MOBILEAPPS CAREERS

intheFinanceBill,"Adhiasaid.

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FinanceMinisterArunJaitleyinhis201617BudgethasannouncedthatbothPoEMand
GeneralAntiAvoidanceRules(GAAR)willbeimplementedfromApril2017.
"GAARisdefinitelycominginfromApril1,2017.WhenwesaidinBudgetweare
postponingimplementationofPoEMbyoneyearwedidnotwantyoutogetanimpression
thatthisgovernmentisalsogoingtopostponeGAAR,"Adhiasaid.
Lastyear,theFinanceMinisterhaddeferredapplicabilityofGeneralAntiAvoidanceAct
(GAAR)bytwoyears.

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TheGovernmenthadearlierproposedimposingtheGAARfromApril1,2015,forthose
claimingtaxbenefitofoverRs3crore.Therulesareaimedatminimisingtaxavoidancefor

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investmentsmadebyentitiesbasedintaxhavens.

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"NowPoEMandGAARarebothsettocome,ourrulesarealreadylaid,ifanyguidanceis
requiredforoffshorefundswewillprovide,"Adhiaadded.

25thOct,2016,TajLandsEnd,
Mumbai

TheCentralBoardofDirectTaxes(CBDT)hadinDecembercomeoutwithdraftPOEM
guidelineswhichsuggestedtwostageprocessfordeterminingtheplaceofeffective

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managementofacompany,withaviewtoassessitstaxliability.

18thNov,2016,NewDelhi

Accordingtothedraftguidelines,thefirststagewouldbeidentificationofthepersonswho

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makethekeymanagementandcommercialdecisionforthecompanyandsecondlythe
determinationoftheplacewherethesedecisionsaremade.
Themodificationoftheexistingnorms,itsaid,isnecessaryasmanycompaniesskiptax
liabilitybymisusingtheguidelines.
Undertheexistingnorms,manycompanies"artificiallyescape"theresidentialstatusunder
theseprovisionsbyshiftinginsignificantorisolatedeventsrelatedwithcontroland
managementoutsideIndia.

VCCIRCLE

ThedraftnormssayPoEMwouldmeanaplacewherekeymanagementandcommercial

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decisionsthatarenecessaryfortheconductofabusinessoranentityasawholearein
substancemade.

13Klikes

Bethefirstofyourfriendstolikethis

ThedraftnormsalsodistinguishbetweenactivebusinessoutsideIndiaandpassiveincome
forthepurposeofdeterminationofPoEM.
Accordingtotheguidelines,acompanywillbedeemedtobeengagedinactivebusiness

Tweetsabout@vccircle

outsideIndiaifthepassiveincome(royalty,capitalgains,dividend,interest,rentalincome)
PrameshJainRetweeted

isnotmorethan50percentofitstotalincome,lessthan50percentofitstotalassetsare

VCCircle.com
@vccircle

situatedinIndia,lessthan50percentoftheemployeesaresituatedinIndiaandthepay
rollexpensesonsuchemployeesislessthan50percentofthetotal.
Thedraftguidelinesalsostatethat"theplaceofeffectivemanagementincaseofacompany
engagedinactivebusinessoutsideIndiashallbepresumedtobeoutsideIndiaifthe

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majoritymeetingsoftheboardofdirectorsofthecompanyareheldoutsideIndia."
1h

Guidelinesprovidefactorssuchaslocationwhereacompany'sboardregularlymeetsand
LaughOutLoudRetweeted

makesdecisions,headofficelocation,etc.

VCCircle.com
@vccircle

Tags:HasmukhAdhia,ArunJaitley

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