Meaning of Place Of Effective Management (i.e. POEM):-
Place of effective management (POEM) is 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.
“Furthermore, the Place of Effective Management is an globally acceptable test. “Moreover, the purpose of this is to recognise whether a company that is incorporated in a foreign jurisdiction is a tax resident of another country.”
Points to remember : –
- The place where management and commercial decisions are take is the important criteria for determination of POEM;
- These management and commercial decisions are the key to the entire business operations of the entity. For the determination of POEM, decision relating to routine operations, should not be relevant.
- The relevant of where the decisions have been in substance.
Non Applicability Of POEM
If a company’s turnover or gross receipts exceed Rs. 50 crores in a financial year, the requirement to determine its Place of Effective Management will apply. This provision would not be relevant if turnover of a company or gross receipts in a given financial year is less or equal to 50 crores. If this situation arises, the company will be regarded as a non-resident for the purposes of taxation in India.
