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27
January 2017
In a bid to bring clarity in tax rules for
foreign entities in India and their transactions, the government on Friday said
the General Anti-Avoidance Rule (GAAR) to plug taxation loopholes, but yet
recognise genuine players, will be applicable from 2017-18. The Total Investment & Insurance
Solutions
"Stakeholders
and industry associations had requested for clarification on implementation of
GAAR provisions and a working group was constituted by Central Board of Direct
Taxes (CBDT) to examine the issues raised," an official statement said.
"Accordingly, CBDT has issued the
clarifications on implementation of GAAR provisions today." The Total Investment & Insurance
Solutions
Among the provisions, if the jurisdiction of
a foreign portfolio investor is finalised based on non-tax commercial
considerations and the main purpose of the arrangement is not to obtain tax
benefit, these rules will not apply. The Total Investment & Insurance Solutions
They will also not interplay with the right
of the taxpayer to select the method of implementing a transaction. Further,
grandfathering (or the application of old rules on certain transactions) will
be available in investments made prior to April 1 this year. The Total Investment & Insurance
Solutions
These
include compulsorily convertible instruments, bonus issuess or stock splits,
consolidation of holdings in respect of investments made prior in the hands of
the of the same investor.
"It has also been clarified that the
adoption of anti-abuse rules in tax treaties may not be sufficient to address
all tax avoidance strategies and the same are required to be tackled through
domestic anti-avoidance rules," the statement said. The Total Investment & Insurance
Solutions
GAAR was first proposed in 2010, targeting
transactions made specifically to avoid taxes by companies such as Vodafone and
Hutchison Essar. It applies to a company in case of abuse of treaty for gaining
undue tax benefit. The Total
Investment & Insurance Solutions
The
rules are aimed at improving transparency in tax matters and help curb tax
evasion.The Total Investment & Insurance
Solutions
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