Direct Tax

Not just contractual structures, but details on LinkedIn profiles could also come into play when tax authorities determine whether a foreign entity has a ‘permanent establishment’ (PE) in India. A recent ruling in the IMAX Theatre Services cases illustrates how Indian authorities and courts are increasingly looking beyond contractual language to assess real economic substance.

Indian borrowing groups have operated with fragmented external borrowings and repetitive hedging activity across multiple jurisdictions resulting in challenges such as duplicated liquidity buffers, mismatched debt maturities and suboptimal refinancing timing. Inconsistent covenant packages across lenders also constrain group flexibility.

The Covid-19 pandemic ushered in a new era in how we imagine the future of work. Studies increasingly show that employees across the world now prioritise flexibility and work–life balance over higher pay, and a core element of this shift is the ability to work remotely. For businesses in the services sector, attracting and retaining quality talent is critical for survival, and enabling work from home (WFH) arrangements has become a commercial necessity for enterprises globally.

As we continue to witness the upward trajectory in the Indian financial markets, one cannot skip the multifold rise in the volume of derivative transactions. This traction in the derivative segment involves equivalent interest from global investors. For these investors, it is imperative that they factor in the applicable tax cost in India while charting their growth strategies to assess the net impact.

In secondary transactions, deferred consideration, milestone-based payments or earn-out payments are often used when the seller expects a higher valuation for the target, but the buyer believes the valuation should be justified based on future performance or achievement of specific milestones. As a result, the buyer may agree to pay an additional amount to the seller for the transfer of the asset, provided certain conditions are met, typically linked to the performance of the underlying business. 

A key decision that multi-national corporations must make while establishing a business in India is the choice of a business vehicle. While incorporating companies or limited liability partnerships are popular choices for doing business in India, several foreign corporations also choose to conduct business by setting up a ‘branch’ in India. 

In the landscape of onshore or cross-border transactions, the no-objection certificate (NOC) from tax authorities under Section 281 of the Income Tax Act, 1961 (IT Act) plays a critical role. The complexities of negotiating NOCs can often place sellers and buyers at odds, making it imperative to understand the fundamentals and relevance of this certificate, as well as its potential ramifications.

India's Union Budget 2024 has introduced significant changes to the country's buyback tax regime, set to take effect from 1 October 2024. These changes mark a fundamental shift in how tax liability is handled for share buybacks, moving it from companies to shareholders. Here’s a simplified overview of these amendments, their potential benefits, and drawbacks.

Not-for-profit (NFP) entities, established for charitable purposes, play a crucial role in reducing the burden on the government by implementing welfare and development delivery systems.

In the evolving landscape of international taxation, the past decade has seen a consistent and widespread acceptance of tax ‘anti-avoidance rules’ globally. These rules give tax authorities wide ranging powers to deny tax benefits. Recently, both the Indian and Mauritian Government took significant strides in this direction by entering into a Protocol to introduce an anti-avoidance rule known as the ‘Principal Purpose Test’ (PPT) within the India-Mauritius tax treaty framework.