MLI, PPT and BEPS impact on treaty access for foreign companies in India.
India has ratified the Multilateral Instrument, which modifies most of its bilateral tax treaties to implement the BEPS minimum standards. The most consequential change for foreign companies is the Principal Purpose Test, under which treaty benefits can be denied where obtaining the benefit was one of the principal purposes of an arrangement, even if the structure is otherwise valid.
The practical effect is that a foreign group can no longer rely on the bare text of a treaty; it must read the treaty as synthesised with the MLI and be able to show genuine commercial purpose. AMLEGALS advises foreign investors on how the MLI changes their specific treaty, the Principal Purpose Test exposure of their holding and financing structure, and the substance and documentation needed to sustain treaty benefits.
Reading the applicable DTAA as modified by the MLI to establish the current treaty position for the structure.
Assessing PPT exposure of the holding, financing and IP structure and the commercial-purpose narrative supporting it.
Advising on the substance, decision-making and documentation needed to sustain treaty benefits.
Reviewing the MLI changes to the PE definition and their effect on the India footprint.
Structuring and documenting beneficial ownership for treaty relief on dividends, interest and royalties.
Positioning the structure for mutual agreement procedure or litigation if treaty benefits are challenged.
The MLI modifies most Indian treaties to add anti-abuse rules, chiefly the Principal Purpose Test, and to change parts of the permanent-establishment definition and dispute mechanism. The treaty must now be read together with the MLI as a synthesised text, which AMLEGALS prepares for your specific treaty.
It allows the tax authority to deny a treaty benefit if obtaining that benefit was one of the principal purposes of an arrangement or transaction, unless granting it accords with the object and purpose of the treaty. Genuine commercial substance and contemporaneous documentation are the defence.
It can, where it has genuine commercial purpose and substance beyond obtaining the treaty benefit. Pure conduit or letterbox structures are exposed under the PPT. AMLEGALS reviews the structure and builds the substance and evidence needed to sustain the claim.
No. No engagement is treated as accepted until conflicts, scope and terms are confirmed in writing. An initial discussion is confidential and is used only to understand the matter and assess fit.
Share the key facts for a confidential preliminary assessment of your India matter.