Place of Effective Management (POEM) – Meaning
When we talk about the meaning of “Place of Effective Management , it is an internationally acceptable test to determine, whether a company incorporated in a foreign jurisdiction, is a tax resident of another country.”
Place of effective management means a place where : –
- Key management, and commercial decisions
- that are necessary for the conduct of the business of an entity as a whole are,
- in substance made.
Points to remember : –
- The criteria for determination of Place of Effective Management are the place where management and commercial decisions are taken;
- Such management and commercial decisions should be key to the entire business operations of the entity. If the decision relate to routine operations, these would not be relevant for the determination of POEM.
- The relevant place is of where the decisions have been in substance
Non Applicability Of POEM
The criteria to determine Place of Effective Management shall be applicable only if the turnover or gross receipts of a company , in a financial year, is greater than Rs. 50 crores. The provision would not be applicable, where the turnover or gross receipts of a company , in a financial year is either less than or equal to 50 crores. In such a case, the company would be treated as a non- resident for Indian tax purposes.
In order to understand the meaning of POEM, you can refer to one of our Videos
If you want to evaluate how Place of Effective Management (POEM) of your foreign company can impact your tax liability in India, you can Talk to our tax expert.
