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Foreign companies will be taxed for money earned by Indian arms

 Foreign companies will be taxed for money earned by Indian arms

The tax department has started questioning the local subsidiaries of several multinational companies to ascertain whether they have foreign operations managed from India. In cases where this is established, the department wants them to pay tax here on their income from such operations. It has already issued notices to the subsidiaries of several MNCs. In the notices, details such as members on the board of directors, minutes of meetings, bank account statements and holding structures of their foreign units have been sought. In some cases, the department has also demanded tax, people with direct knowledge of the matter said. In one such notice, which ET has seen, the department states that the Indian subsidiary had effective control and management of certain foreign operations, and so revenue allocating to those businesses was taxable in India. Tax experts said in most cases, the notices did not mention the clause on place of effective management (POEM). Under POEM, overseas subsidiaries could be treated as domestic entities for tax purposes if they are controlled and managed from India

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