Direct Tax Code and impact on non-residents

By Pranay Bhatia and Vidushi Maheshwari, Economic Laws Practice
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The draft Direct Tax Code (DTC) released by the Finance Ministry in August 2009 posed certain challenges for taxation of non-residents. In order to clarify the concerns and issues raised by taxpayers, the Central Board of Direct Taxes (CBDT) released a revised discussion paper on 15 June.

Treaty override and GAAR

The discussion paper clarifies that non-residents would not be able to enforce treaty provisions where General Anti Avoidance Rules (GAAR) are invoked by the tax department. When GAAR is not invoked it is proposed that either the provisions of the DTC or the tax treaty, whichever is more beneficial to the taxpayer, will be applicable.

Pranay Bhatia Partner Economic Laws Practice
Pranay Bhatia
Partner
Economic Laws
Practice

The DTC provisions would also prevail when branch profits are to be taxed or when the tax officer invokes the Controlled Foreign Corporation (CFC) provisions.

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Pranay Bhatia is a partner at Economic Laws Practice where Vidushi Maheshwari is an associate. Economic Laws Practice is a full-service law firm headquartered in Mumbai and has offices in New Delhi, Pune and Ahmedabad.

ELP

Economic Laws Practice

1502 A Wing, Dalamal Towers

Free Press Journal Road

Nariman Point, Mumbai 400021

India

Tel: +91 22 6636 7000

Fax: +91 22 6636 7172

Email: pranaybhatia@elp-in.com

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