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Computing value of Assets for application of POEM Test

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May 5, 2021

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4 mins read

Computing value of Assets for application of POEM Test – Non Resident Taxation – International Taxation Case Study

A company shall be said to be engaged in ‘Active Business Outside India’ for the purpose of POEM,  if amongst other conditions, less than 50% of its total asset are situated in India. From the following Balance Sheet, compute the value of the asset : –

Asset Amount – Opening Amount – Closing
Computers – Depreciated individually 5,50,000 7,50,000
Building – Block of Asset 8,00,000 10,00,000
Plant and Machinery – Block of Asset 10,00,000 15,00,000
Land 20,00,000 30,00,000

50% of the Plant and Machinery were purchased on the last date of the FY and depreciation has been claimed thereon assuming they were used for less than 180 days ?

Computing value of Assets for application of POEM Test – Non Resident Taxation – International Taxation Case Study – Solution :-

International Taxation Services

The  value of the assets , for the purpose of test of POEM for different categories of asset has to be calculated as under : –

Particulars Value of asset
In case of a individually depreciable asset Average of opening balance and closing balance of individual assets
In case of pool of fixed asset, being treated as a block for depreciation Average of opening balance and closing balance of block of assets
In case of any other asset Value as per books of account

In view of the above provisions,  the value is calculated as under : –

Particulars Value of asset
Computer –  individually depreciable asset 6,50,000
Building – Block of Asset 9,00,000
Plant and Machinery – Block of Asset 12,50,000
Land 30,00,000

For any queries, please write them in the Comment Section or Talk to our tax expert

Arinjay Jain

Bio of author

Arinjay is a Chartered Accountant with more than 20 years of post-qualification experience. He worked as Director, in the M&A Tax Division at KPMG in India. Presently, he is advising several MNCs in UAE on Economic Substance Regulations and impact of the UAE Corporate Tax Law on their business and clients across globe on International Tax issues . He is a well recognised Trainer of International Tax and UAE Corporate Tax. The areas of service include the following : - Advise and Compliance relating to International Tax Issues; Advise relating to UAE Corporate Tax Issues; Advise and Compliance relating to UAE Economic Substance Regulations; Advise and Compliance relating to Indian Income Tax Issues; Other connected matters from a Regulatory perspective.

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