POEM residency risk for foreign companies with India-based decision-making.
A foreign company can be treated as a tax resident of India - and taxed on its worldwide income - if its place of effective management is in India in the relevant year. POEM looks to where the key management and commercial decisions necessary for the conduct of the business are in substance made, which matters for foreign holding and group companies with significant Indian management involvement.
The CBDT guidelines distinguish companies with active business outside India from others and set out the factors that determine POEM. AMLEGALS advises foreign companies on their POEM exposure, how board and management processes affect it, and the governance arrangements needed to keep effective management outside India where that is the intended position, and applies the treaty tie-breaker where residence is contested.
Assessing where key management and commercial decisions are made and the resulting POEM risk.
Applying the active-business-outside-India test under the CBDT guidelines.
Advising on board composition, meeting location and decision-making to support the intended residence.
Building the record of where decisions are genuinely made.
Applying the treaty residence tie-breaker where dual residence is asserted.
Advising on the tax consequences and compliance if Indian residence is established.
Yes, if its place of effective management is in India in the year - that is, where the key management and commercial decisions for the business are in substance made. Indian residence brings worldwide income into the Indian tax net, subject to treaty relief.
Under the CBDT guidelines, a company with active business outside India is generally not treated as having its POEM in India if the majority of board meetings are held outside India and management is genuinely exercised there. The test and its application are fact-specific.
By ensuring that key decisions are genuinely made, minuted and evidenced outside India, through appropriate board composition and process, where offshore residence is intended. AMLEGALS designs and documents the governance to support the position.
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.