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POEM of Budget 2015 |
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POEM of Budget 2015 |
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POEM of Budget 2015 (w.e.f. 1st April, 2016) Place of effective management [POEM] is an internationally recognised concept for determination of residence of a company incorporated outside India. POEM means the place where key management and commercial decisions that are necessary for the conduct of the entity’s business as a whole, are in substance made. Before coming on changes made by this budget 2015, we need to see the old and new provisions to determining the residential status of a company incorporated outside India. Existing provision to determine residence of a company incorporated outside India As per Section 6 (3) of Income Tax Act, 1961, a company is said to be resident in India in any previous year, if -
New provision to determine residence of a company incorporated outside India As per Section 6 (3) of Income Tax Act, 1961, a company is said to be resident in India in any previous year, if -
Analysis of change in condition In old conditions, whole of the control and management should be in India and it is also necessary that such control and management should be throughout the year. Due to this if any company hold even a single board meeting outside India, it can be out of resident category. So, in new conditions, concept of POEM has been introduced. There are well recognized guiding principles for determination of POEM although it is a fact dependent exercise. POEM is well known factor in double taxation avoidance agreements entered into by India with other countries. It is also in line with international standards. It is also proposed that a set of guiding principles to determine POEM would be issued for better administration.
By: Deepak Aggarwal - March 2, 2015
Discussions to this article
How this will affect the functioning of 100% subsidiary in India ( closely held) S.Sridharan
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