Income Tax Department Proposes New Rules To Tax MNCs And Digital Firms In India

Posted on:22 Apr 2019 17:58:03
Income Tax Department Proposes New Rules To Tax MNCs And Digital Firms In India
22 April 2019 Current Affairs: The income tax department altered the method for taxing multinational companies (MNCs) and digital firms with a permanent establishment in India by taking into account various factors like domestic sales, employee (manpower and wages) strength, assets and user base.
In ‘Profit Attribution to Permanent Establishment (PE) in India’ report, the CBDT (Central Board of Direct Taxes) Committee stated that MNCs that are suffering global losses or a global profit margin of less than 2% and have their operations in India will be considered to have made a profit of 2% of Indian revenue and will be taxed accordingly.
The committee has altered the system to protect India’s revenue interests.
The CBDT invited comments from stakeholders on the report within 30 days.
An MNC that has a fixed place of business in India is considered to have a Permanent Establishment (PE) in India and is taxed as per the domestic laws.
The CBDT report suggested amendments to Rule 10 of income tax rules to provide that in case of an assessee, (is any individual who is liable to pay taxes to the government against any kind of income earned or any losses incurred by him for a particular assessment year) the income from a business that is attributable to the operations carried out in India and is considered to arise in India; when the individual or the business is not a resident of India but has a business connection in India and derives sales revenue from India, the income from such business shall be determined by distributing the profits derived from India by a 3 equally weighted factors of sales, employees and assets.
The income tax department altered the method for taxing multinational companies (MNCs) and digital firms with a permanent establishment in India by taking into account various factors like domestic sales, employee (manpower and wages) strength, assets and user base.
In ‘Profit Attribution to Permanent Establishment (PE) in India’ report, the CBDT (Central Board of Direct Taxes) Committee stated that MNCs that are suffering global losses or a global profit margin of less than 2% and have their operations in India will be considered to have made a profit of 2% of Indian revenue and will be taxed accordingly.
The committee has altered the system to protect India’s revenue interests.
The CBDT invited comments from stakeholders on the report within 30 days.
An MNC that has a fixed place of business in India is considered to have a Permanent Establishment (PE) in India and is taxed as per the domestic laws.
The CBDT report suggested amendments to Rule 10 of income tax rules to provide that in case of an assessee, (is any individual who is liable to pay taxes to the government against any kind of income earned or any losses incurred by him for a particular assessment year) the income from a business that is attributable to the operations carried out in India and is considered to arise in India; when the individual or the business is not a resident of India but has a business connection in India and derives sales revenue from India, the income from such business shall be determined by distributing the profits derived from India by a 3 equally weighted factors of sales, employees and assets.

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