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India: Proposed advance ruling changes, implementing BEPS Action 5

India: Proposed advance ruling changes, BEPS Action 5

India’s Central Board of Direct Taxes issued draft changes to the income tax rules and forms to align them more closely with the OECD’s base erosion and profit shifting (BEPS) Action 5 relating to permanent establishment-related rulings.

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Under BEPS Action 5, permanent establishment-related rulings (by India’s Authority for Advance Rulings) are required to be exchanged not only with the countries of residence of all related parties with whom a taxpayer enters into transactions but also with the country of residence of the immediate parent company and the ultimate parent company. 

To implement the recommendations made under BEPS Action 5 and to bring greater transparency in cross-national transactions, Forms 34C and 34D (the forms in India for advance rulings) need to be modified so that certain information—such as the name, address, and country of residence of a non-resident’s immediate parent company or ultimate parent company—is captured at the application stage. The Finance Act, 2017 amended the definition of the term “applicant” for the purpose of advance rulings under the Income-tax Act, 1961. However, no consequential amendments were made in Rule 44E of the Income-tax Rules, 1962 (that is, the rules relating to application for obtaining an advance ruling) and the applicable forms to bring them in harmony with the relevant amendment to the tax law. Accordingly, the Central Board of Direct Taxes issued a draft notification proposing amendments to Rule 44E and to Forms 34C, 34D and 34DA. 

 

Read an April 2018 report [PDF 362 KB] prepared by the KPMG member firm in India

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