CBDT Current Affairs

CBDT forms Working Group to assess tax risks of High Net Worth Individuals migrating abroad

The Central Board of Direct Taxes (CBDT) has constituted 5-member working group (committee) to examine taxation aspects related to High Net Worth Individuals (HNWIs) who are migrating abroad to other jurisdictions. The Working Group will be headed by Pragya Sahay Saksena, a joint secretary with Foreign Tax & Tax Research Division of CBDT.

Key Facts

The working group will make recommendations for policy decision in respect of tax risks of migrating HNWIs. It has also been empowered to coordinate with various divisions and directorates of CBDT to formulate India’s position for various aspects related to taxation of migrating HNWIs. The CBDT has termed such HNWIs as substantial tax risk as they may treat themselves as non-residents for taxation purposes in India.

Background

In recent times, there have cases of HNWIs migrating from residence of their country to other jurisdictions. Such HNWIs pose substantial tax risk as they treat themselves as non-residents for taxation purposes in first jurisdiction even though have strong personal and economic ties with that jurisdiction.

The Working Group has been constituted for examining the taxation aspects of such HNWIs. Its announcement comes at the time when there are concerns over recent cases of HNWIs such as Vijay Mallya and Nirav Modi fleeing from country amid ongoing investigations against them.

According raw data analysis by Morgan Stanley Investment Management, In 2017 alone, 7,000 millionaires left India without paying taxes. It makes India top of the exodus charts of HNWIs causing huge loss the exchequer. The data shows that 2.1% of India’s rich left country compared with 1.3% for France and 1.1% for China.

Central Board of Direct Taxes (CBDT)

CBDT is nodal policy-making body of the Income Tax (IT) department under Finance Ministry. It is a statutory authority established under The Central Board of Revenue Act, 1963. It is supreme body in India for framing policies related to direct taxes. The composition of CBDT includes Chairman and six members.

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Government inks 16 APAs in March 2018

The Central Board of Direct Taxes (CBDT) has entered into 14 Unilateral Advance Pricing Agreements (UAPA) and 2 Bilateral Advance Pricing Agreements (BAPA) in March 2018. The 2 bilateral APAs were entered into with US . With the signing of these Agreements, CBDT has entered total 219 APAs. This includes 199 Unilateral APAs and 20 Bilateral APAs. Of this, 67 APAs (58 Unilateral and 9 Bilateral) were signed in FY 2017-18.

Key Facts

The 16 APAs entered into during March, 2018 pertain to various sectors of economy like Information Technology, Telecommunication, Pharmaceutical, Automobile, Beverage, Trading, Manufacturing and Banking, Finance and Insurance.

The international transactions covered under them include payment of royalty fee, provision of corporate guarantee, business support services, marketing support services, engineering design services, engineering support services, contract manufacturing, merchanting trade of agro commodity, import/export of components, provision of IT services, ITES, investment advisory services, availing of technical services, etc.

Advance Pricing Agreement (APA) Scheme

The APA scheme launched by Government endeavours to provide certainty to taxpayers in domain of transfer pricing by specifying methods of pricing and setting prices of international transactions in advance. Its provision was introduced in Income-tax Act, 1961 in 2012 and Rollback provisions to it were introduced in 2014.

The scheme aims to strengthen Government’s resolve of fostering non-adversarial tax regime. It has significantly contributed towards improving ease of doing business in India and has been appreciated nationally and internationally for being able to address complex transfer pricing issues in a fair and transparent manner.

Significance

APA gives certainty to MNCs that agree on certain principles in valuation of their cross-border transactions. They also provide assessees with alternate dispute resolution mechanism with respect to transfer pricing. It helps in determining arm’s length price of international transactions in advance for maximum period of five future years.

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