MNC Tax

Experts say while the backlog of cases will most likely be reduced, the quality of rulings may not inspire taxpayers

Routine administrative functions by the regional headquarters in India of multinational corporations (MNCs) have been exempted from taxes under the rules on Place of Effective Management (PoEM). PoEM is a test of residential status of companies, triggered by the practice of some companies effectively operating out of India but incorporating themselves abroad, to exploit a low or zero tax environment.The Central Board of Direct Taxes (CBDT) has said functions such as payroll, accounting, human resources or routine banking by these headquarters will not lead to a PoEM in India.However, this is subject to a condition that regional headquarters should be functioning according to global policies of the parent entity and not be specific to any entity or group of entities.There had been concerns at MNCs that their regional offices in India having employees handling administrative functions for multiple countries within the region would trigger PoEM, making them liable to Indian tax on ...