Foreign Companies with Place of Effective Management (POEM) in India – to be considered as resident Indian Company and suffer tax as applicable to a foreign company 40% (w.e.f. 1st April 2017)
Notification No. S. O. 3039(E) dated 22nd June, 2018
The said notification provides following clarification with regards to taxation of foreign companies in India once they become resident in India on account of their POEM being in India.
- The said company though treated as a resident in India will be tax at 40% rate as applicable to a foreign company.
- Computing the written down value of depreciable assets and determining depreciation which can be claimed on these assets.
- Determining how to arrive at brought forward loss and unabsorbed depreciation.
- Determining the amount of set off and carry forward of brought forward loss and unabsorbed depreciation.
- Applicability of withholding of taxes as per the provisions of Chapter XVII-B (TDS provisions) of the Act before and after becoming a resident in India.
- Applicability of the provisions of Section 195(2) of the Act as applicable to a non-resident
- Entitlement to relief or deduction of taxes paid in accordance with the provisions of Section 90 or Section 91 of the Act.
- Income on which foreign tax has been paid or deducted, is offered to tax in more than 1 year, credit of foreign tax would be allowed across those years in the same proportion in which the income is offered to tax or assessed to tax in India.
The said notification also gives clarification on preparation of profit and loss account and balance sheet as well as carry forward of loss and unabsorbed deprecation where the accounting year of the foreign company does not end on 31st March.