Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: cpt :: Central Excise rule to resale the machines to a new company :: ARTICLES ON INPUT TAX CREDIT IN VAT :: articles on VAT and GST in India :: VAT Audit :: due date for vat payment :: TAX RATES - GOODS TAXABLE @ 4% :: list of goods taxed at 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT RATES :: form 3cd :: TDS :: ACCOUNTING STANDARD :: ACCOUNTING STANDARDS :: empanelment
 
 
« General »
 Filing ITR just got easier for salaried class with CBDT's one-page form
 Why consumers should welcome GST
 Retailers need to file single GST return every month
 Aadhaar is must for income tax returns if you have one; Here's how you can file it online
 Will it be a tax haven above the law?
 Your mutual fund investment tax efficient? Here are 3 steps to ensure utmost efficiency for your portfolio
 Finally a goods and services tax. But what lies ahead?
 Tax May Rise On Outbound M&As, Indian Mncs’ Investments
 Filing income tax return? Do remember to claim benefits on your reimbursements
 Banks will have a hard slog ahead to get GST-ready
 Clarification regarding applicability of Section 16 (1)(a) of the Companies Act. 2013 with reference to cases under corresponding provisions of Companies Act. 1956

Hike in royalty tax to level tax anomalies
March, 05th 2013

None of the frontline listed stocks, which pay royalties to their parent companies, are likely to be affected, though the finance minister has hiked the tax on royalty payouts to 25 per cent from the existing 10 per cent. Reason: Most listed companies paying royalty to their respective parents are governed by double taxation avoidance agreements (DTAAs) signed between their country of residence and India. The move will impact largely those companies where the parent or the beneficiary of the royalty receipt is located in a country without a tax treaty with India.

So, Maruti will not have to pay anything extra, since India has a DTAA with Japan and the rate under this agreement would be capped at 10 or 15 per cent. Some other frontline companies that will not be affected by this move are Nestle, ACC, Ambuja and Hindustan Unilever. Vinay Khattar, head of research at Edelweiss Wealth Advisory and Investment Services, says the move will have no impact on any frontline stocks other than Cummins, which will see a marginal impact.

Clearly, most countries have a tax treaty with India and, therefore, large multinationals operating in India will not see any impact. Punit Shah, co-head of tax at KMPG India says: "The purpose of the hike in royalty tax is not to burden foreign companies operating in India but to set right an anomaly of the past. Under local laws, royalty payments attracted a tax of 10 per cent, which was lower than the tax rate under most DTAAs. The tax paid on royalty under most DTAAs has been higher than the 10 per cent rate levied under local laws." So, companies making royalty payouts to countries which did not have a tax treaty with India stood to gain, as those which had an agreement were paying higher.

India currently does not have a tax treaty with countries such as Hong Kong, Cayman Islands, Isle of Man and several other tax havens. After this, these countries would be forced to enter into tax treaties with India, failing which companies headquartered in these countries will have to pay higher taxes, experts believe. Also, even if there is a DTAA, companies will have to produce a tax residency certificate and also prove beneficial ownership, explains Shah. This has been done to deter payouts to companies based in tax havens acting as "fronts". Now, for any kind of royalty payment, proof of "beneficial owner" will be important.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Team

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions