International Tax & FEMA
International Tax & FEMA
Cross-border transactions, both inbound & outbound are on a steady rise. With this rise, the Foreign Exchange Management Act (FEMA) 1999 gained importance. FEMA is a policy driven law regulated by the Reserve Bank of India (RBI) and the Central Government unlike other statues like the Income-tax Act etc. FEMA law is largely practiced through notification and circulars issued by the RBI or the government from time to time. The RBI has done an excellent job of compiling most of the regulations in the form of Master Directions and made available for all the stakeholders on its website.
Few unwritten rules of practicing FEMA law differentiates itself from other laws. E.g. what you cannot do directly, you cannot do indirectly. Or all the Capital account transactions are restricted unless and otherwise specifically permitted and all the Current Account transactions are permitted unless specifically restricted.
Few issues are governed by the intentions of the regulator and have little mentioning in the statutes. For e.g. the intention of the regulator is not to permit “Round Tripping” of investments into India but there is hardly any mentioning of it in the statues.
Such issues make it difficult to for the business owners to take commercial decisions. Nevertheless, the law is ever evolving and has improved over the years.
- Acquisition and Transfer of Immovable Properties
- Annual Return on Foreign Liabilities and Assets (FLA)
- External Commercial Borrowings (ECB)
- Foreign Direct Investments (FDI)
- Liaison Office (LO) / Branch Office (BO) / Project Office (PO)
- Liberalized Remittance Scheme (LRS)
- Overseas Direct Investments (ODI)
- Penalty & Compounding of Offenses
- Trade Transactions
International Tax law is evolving at a rapid pace considering the rise of e-commerce and technology driven businesses. There is gradual move from place-based taxation to source-based taxation. Digital Taxation has gained importance. Indian business houses too are looking to acquire foreign companies abroad, access foreign funds etc., international tax strategies become crucial. The Indian Government has been active and engaging with global counterparts to be in sync with the changing business needs. It has signed Multi-Lateral Instruments (MLI) with various countries, is actively participating at global platforms like OECD for implementing Base Erosion and Profit Shifting (BEPS). With regulations like General Anti Avoidance Rules (GAAR), Thin Capitalisation, Place of Effective Management (POEM) rules it is imperative to analyse the impact of applicable international tax provisions to all the relevant transactions.
At AJA, we have enjoyed advising clients in tax and regulatory planning, tax strategy, structuring, transfer pricing support, tax litigation support, compliances and filings for over 30 years.
- Planning Corporate & International Tax Strategies
- BEPS & Impact thereof on International Structure
- Impact of General Anti-Avoidance Rule (GAAR) on corporate tax strategies
- Cross Border Transactions
- Representation before Tax Authorities & Litigation Support