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MNC’s Await Global Tax Recast, but Fear Hostile Stance in India

Several multination also with significant India presence are analyzing their involvement of their inter-group transaction, centralized invoicing centers, cloud infrastructure and operating companies with their structures fearing aggressive tax stance by the tax authorities, said people aware of the development.

As multinationals and social media giants undertake global overhaul of their tax structures India’s data protection laws combined with other tax frameworks, guidelines and recent ruling are set to create complications for them, say tax experts.

Several countries are joining hands together to come up with a global tax structure under OECD’s Base Erosion and Profit Shifting (BEPS) framework to counter tax evasion by global companies.

Countries all over the world have realized that multinationals including Google, Facebook, Amazon, Microsoft and Adobe have created to escape taxes. While the global tax deal-BEPS-is a couple of year away, the multinationals are looking to create a “fact pattern” so that they don’t fall on the wrong side of the law.

Some companies are looking to split their data centers, intellectual property (IP) holding companies and other such companies as a hedge against the tax uncertainty- some of it may have to be housed in India due to domestic laws.

“Many multinationals are observing the OECD deal could take longer, these companies are exploring options around their investment hubs, intergroup transactions, invoicing centers and IP holding entities. The India payment, data protection and privacy legislation could just add to the complication as India wants these multinationals to keep their data and even servers in the country similar to something that’s already been done in China,” said Rohinton Sidhwa, partner, Deloitte India.

Most multinationals want to create fact patterns so that they can argue in future that they can argue in future that the realignment or the restructuring was not done merely for saving taxes. A fact pattern is a set of relationships or transactions that have been established regarding a situation which could lead to a legal conclusion. Google, Facebook, Microsoft and Adobe did not respond to ET” s query.

“Amazon has consistently supported the OECD Inclusive Framework’s effort to achieve a consensus-based solution for international tax harmonization and we welcome the continued progress,” said an Amazon spokesperson.

Tech giants such as Google, Facebook and Twitter may have to pay significantly more tax in India as a result of the government’s new social media guidelines, ET first wrote on March 11.

Complying with Indian residents to head compliance, as well as nodal and grievance officers. S-ET

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