Controlled Foreign Corporation (CFC), as the name suggests, is a foreign corporation, which is incorporated in a low tax jurisdiction and are controlled by a person (individual, company or together by both of them) who is a tax resident of a higher tax rate jurisdiction. CFC Regulations typically provides for taxation of certain income (generally … Read more
BEPS ACTION PLANS OECD BEPS Action Plan has sets forth 15 Action Plans, which are designed to address BEPS, by bringing fundamental changes to the international tax standards. These Action Plans are based on three core principles of Coherence, Substance and Transparency. The classification of various Action Plans based on these three principles are as … Read more
Base Erosion and Profit Shifting – Meaning Base Erosion and Profit Shifting (“BEPS”) strategies, take advantage of gaps between tax systems of various countries to achieve double non-taxation (not taxed in either of the countries) or very low taxation. Every country levies Corporate tax, under its domestic tax laws, which may be different in different … Read more
MEASURES FOR ANTI – TREATY SHOPPING IN TAX TREATIES BENEFICIAL OWNERSHIP The concept of “beneficial owner” implies, that the concessional withholding tax benefit, under a Treaty, shall be available to the legal owner, only if he is also the beneficial owner of the income, or the beneficial owner is a resident of the same state … Read more
What is Treaty Shopping? Treaty shopping refers to a “situation where a person who is not entitled to benefits of a tax treaty makes use-in the widest sense of the word of an individual or of a legal person, in order to obtain those treaty benefits that are not available directly.” Treaty shopping is defined … Read more
FAQ ON GAAR- CIRCULAR NO. 7 OF 2017 DATED 27-1-2017 FAQs ON GAAR – QUESTION 1 : – Will GAAR be invoked if SAAR applies? ANSWER : – It is internationally accepted that specific anti avoidance provisions may not address all situations of abuse and there is need for general anti-abuse provisions in the domestic … Read more
GAAR EXAMPLES – 1 : TAX MITIGATION SETTING UP AN UNDERTAKING IN AN SEZ Facts India Chem, an Indian company sets up a unit in a Special Economic Zone (SEZ) in F.Y. 2013-14 for manufacturing of It claims 100% deduction of profits earned from that unit in F.Y. 2021 -22 and subsequent Sets up years … Read more
GAAR refers to General Anti-Avoidance Rules, which are introduced in tax laws, to catch all schemes for tax avoidance in general. Unlike SAAR, GAAR is intended to apply to all types of transactions and arrangements, all types of taxpayers, all types of taxes on various income. Since they are general in nature and can have … Read more
“Tax avoidance” means arranging affairs where the main object or purpose or one of the main object or purposes of the arrangements are to obtain tax advantages, although the arrangement, even though it could be strictly legal, is usually in contradiction with the intent of the law it purports to follows. Thus, one can identify … Read more
EXTRINSIC AIDS TO INTERPRETATION OF A TAX TREATY There are several extrinsic material used in interpretation of tax treaties including the following : – Interpretative Protocols, Resolutions and Committee Reports, on agreed interpretations; Subsequent agreement between parties regarding the interpretation of the treaty (Article 31(3) of the VCLT ) Subsequent conduct of the state parties, … Read more