India: Foreign Companies Without Permanent Establishment: Freed From MAT Provisions
The Central Board of Direct Taxes (CBDT), Government of India, via press release dated September 24, 2015, assured the inapplicability of Minimum Alternate Tax (MAT) provisions to Foreign Companies with effect from 01.04.2001.
The Government recently issued a circular, accepting the recommendations of the Committee (A P Shah Committee) appointed by it, wherein it had clarified the inapplicability of MAT provisions on Foreign Financial Institutions (FIIs) and Foreign Portfolio Investors (FPIs).
On further recommendation of the Committee the government had been considering the applicability of MAT under section 115JB of the Income-tax Act to Foreign companies having no place of business/ permanent establishment in India.
After due consideration of the various aspects of the matter, the Government has decided that with effect from 01.04.2001 the provisions of section 115JB shall not be applicable to a foreign company if —
- The foreign company is a resident of a country having Double Taxation Avoidance Agreement (DTAA) with India and such foreign company does not have a permanent establishment within the definition of the term in the relevant DTAA, or
- The foreign company is a resident of a country which does not have a DTAA with India and such foreign company is not required to seek registration under section 592 of the Companies Act 1956 or section 380 of the Companies Act 2013.
Therefore, now Foreign Companies other than FIIs not having PE shall also be exempted from Minimum Alternate Tax, with retrospective effect from April 1, 2001. An appropriate amendment to the Income-tax Act in this regard will be carried out.
