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: due date for vat payment :: articles on VAT and GST in India :: cpt :: Central Excise rule to resale the machines to a new company :: VAT RATES :: ACCOUNTING STANDARD :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT Audit :: ARTICLES ON INPUT TAX CREDIT IN VAT :: form 3cd :: TAX RATES - GOODS TAXABLE @ 4% :: list of goods taxed at 4% :: ACCOUNTING STANDARDS :: TDS :: empanelment
 
 
« News Headlines »
 Income tax dept notifies amendments for sharing taxpayer information
 Seven things you must do before 31st March
 Income Tax saving investments: Top 5 options available for high-income individuals
 How to use zero tax rule on long term capital gains on stocks
 GST Returns - Furnishing details of inward supplies
 5 ways to maximise you income tax return
 Income-tax (2nd Amendment) Rules, 2017
 Soon, Faster PAN, An App For Filing Tax Returns
 Changes in income tax return filing process
 New Income Tax Rates And Deductions Applicable From April 1, 2017
 Tax and transparencya

Tax shadow on foreign arms' dividend
July, 31st 2009

Undistributed dividends of foreign corporations controlled or owned by Indian companies will be taxed in the near future, said income tax (I-T) department sources.

Most countries have Controlled Foreign Corporation (CFC) laws that enable authorities to levy such taxes. These laws effectively check the governments revenue loss due to the transfer of undistributed dividends to offshore tax havens like Isle of Man, Cayman Islands and Mauritius.

Indian tax authorities, for long, have maintained that there is a need to have a similar law here. Tax experts say it will be difficult for the government to refrain from introducing such a legislation as there is a substantial flow of outbound investments from India.

We should tax the undistributed dividend of the foreign corporations owned by Indian companies. It does not matter if the dividends are brought to India or not. Tax for this has to be paid here since the resources for making these cross-border acquisitions are mobilised from India, said a senior I-T department official, who asked not to be named.

PwC taxation leader Dinesh Kanabar said it was important that the introduction of CFC be preceded by a major change in the I-T Act that would allow consolidation of separate legal entities. A company that exists in a foreign country could be controlled by an Indian company. It still, however, remains a separate legal entity. To treat both of them as a single legal entity requires a major change in the Income-tax Act.

Today, besides the UK and US, CFC laws are present in 25 countries. Most have guidelines for defining CFCs. In the US, 50% of the voting rights or 50% of the value of shares is an indication of CFC. In some countries, CFC laws cover even the Permanent Establishments (PEs) of resident companies.

Cross-border taxation specialist TP Ostwal said it is still too early for India to introduce CFC laws. CFC laws are introduced by developed countries whose outbound investments have substantially exceeded inward flow of funds for long. India has not got to that point, he added.

Incidentally, the major reason for the rising pressure on the government for CFC rules is the change in the investment pattern that shows outbound investments increasing at a steady pace in recent years. Across the world, the objective of introducing CFC laws is to curtail the loss of revenue. In line with that, tax is levied on the resident company irrespective of whether the dividend of its overseas company is distributed or not.

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

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