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Place of Effective Management

POEM Guidance For Companies Not Engaged in Active Business Outside India

by Sanjeev Archak Sanjeev Archak No Comments

Previously we discussed the parameters of determining a company to be considered as engaged in “active business outside India” and the POEM guidance associated with it. Today we talk about the guidelines for those companies that are not engaged in active business outside India.

POEM Guidance for companies not engaged in active business outside India

For companies not engaged in active business outside India, a two-stage process for the determination of Place of Effective Management is provided as follows:

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POEM Guidance For Companies Engaged in Active Business Outside India

by Sanjeev Archak Sanjeev Archak No Comments

In our previous post, we discussed the idea of Place of Effective Management and how it came into existence. Today we will be focusing on the POEM guidance for companies that are engaged in active business outside India.

Determination of “active business outside India”

A company shall be considered as engaged in “active business outside India” if the passive income is not more than 50% of its total income; and if the following conditions are met –

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Place of Effective Management Rules

by Sanjeev Archak Sanjeev Archak No Comments

The idea of Place of Effective Management or POEM was first introduced in the Finance Act 2015 for the purpose of determining the residential status of foreign businesses. As per the act, any business having its place of effective management in India will be considered as an Indian resident and accordingly, it’s global income will be taxable in India.17

But the Finance Act was missing the entire criteria and process for determining the place of effective management. For this purpose, the Central Board of Direct Taxes (CBDT) introduced the Guiding Principles for determination of Place of Effective Management (POEM) of a Company.

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