Tax relief likely on creation of permanent establishment

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India will provide relief to overseas companies with global income that may be subject to tax here because the presence of their key management personnel stuck in the country during the lockdown created a ‘permanent establishment’ or place of effective management in the country. The respite will be granted on a case-by-case basis.

The govt has exempted individuals by excluding their lockdown stay from residency calculation and it was widely expected that a similar concession would be given to companies. “We can provide relief on a case-by-case basis,” an official with the Central Board of Direct Taxes said.

The presence of key decision makers and employees of a business establishment in a tax jurisdiction due to reasons beyond their control such as lockdowns and travel restrictions can lead to the creation of a permanent establishment and make the company liable to pay tax.

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