With effect from Assessment Year 2017-18, a company is said to be resident in India in any previous year, if:
(i) it is an Indian company; or
(ii) its place of effective management, at any time in that year, is in India.
For this purpose, the “place of effective management” means a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance made.
The concept of POEM is effective from Assessment Year 2017-18. The CBDT has issued the final guidelines for the determination of the POEM of a foreign company.
The final guidelines on POEM contain some unique features. One of the unique features is a test of Active Business Outside India (ABOI). The guidelines prescribe that a company shall be said to engage in 'active business outside India' if passive income is not more than 50% of its total income. Further, there are certain additional cumulative conditions to be satisfied regarding the location of total assets, employees and payroll expenses.
The place of effective management in the case of a company engaged in active business outside India shall be presumed to be outside India if the majority of meetings of the board of directors of the company are held outside India.
In cases of companies other than those that are engaged in active business outside India, the determination of POEM would be a two-stage process, namely:—
The first stage would be identification or ascertaining the person or persons who actually make the key management and commercial decision for the conduct of the company's business as a whole.
The second stage would be the determination of the place where these decisions are in fact being made.
However, it has been provided that the POEM guidelines shall not apply to a company having turnover or gross receipts of INR 50 crores or less in a financial year vide CIRCULAR NO.8, DATED 23-2-2017.
(To know more about POEM guidelines, read CIRCULAR NO.6, DATED 24-1-2017.)
Comments
0 comments
Please sign in to leave a comment.