COVID-19 CASES
WorldIndiaConfirmed14,378Deaths480Confirmed2,240,191Deaths153,822Managers of foreign portfolio investments and private equity funds based in Mauritius or Singapore who had moved to India during the Covid-19 pandemic have reached out to advisors fearing that the funds may have become taxable in India.
Their worry stems from regulations that make a fund taxable in a jurisdiction where the manager or decision-maker has been based for 30 days.
With the lockdown now extended to May 3, fund managers whose stay in India exceeds a month are looking for a workaround.
According to the current taxation regime, a permanent establishment is created in a place where decisions are taken or a decision-maker is located and the local jurisdiction has the right to tax the global income of the company or fund.
Interestingly, many fund managers have applied for leave or opted for a secondment over the past few weeks.
“If any fund manager is stuck in India for 30 days, there is a risk that it could create a permanent establishment for the whole fund and lead to domestic taxes,” said Rajesh H Gandhi, a partner at Deloitte India. “Many fund managers have gone on leave and even taken secondments, but that may still not be sufficient.”
Taxmen can still question whether the decision to go on leave or secondment was taken merely for tax arbitrage.
Tax advisors are asking fund managers not to make phone calls or write transactional emails that could establish a trail and fact pattern that decisions were taken in India.
According to guidelines by the Organisation for Economic Co-operation and Development on matters related to the Covid-19 crisis, the presence of people stuck in a country due to the pandemic should not be considered as the creation of a permanent establishment.
However, tax experts said unless India comes out with relaxations, revenue officials can still question these situations.
Source: indiatimes.com
