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Aligning the scope of “business connection” with modified PE Rule as per Multilateral Instrument (MLI).

Budget - Dated:- 5-2-2018 - Aligning the scope of business connection with modified PE Rule as per Multilateral Instrument (MLI). Under the existing provisions of Explanation 2 to clause (i) of sub-section (1) of section 9, business connection includ .....

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reements (DTAAs). In terms of the DAPE rules in tax treaties, if any person acting on behalf of the non-resident, is habitually authorised to conclude contracts for the non-resident, then such agent would constitute a PE in the source country. Howeve .....

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he contract. Further, under paragraph 4 of Article 5 of the DTAAs, a PE is deemed not to exist when a place of business is engaged solely in certain activities such as maintenance of stocks of goods for storage, display, delivery or processing, purch .....

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with a view to preventing avoidance of payment of tax by circumventing the existing PE definition by way of commissionaire arrangements or fragmentation of business activities. In order to tackle such tax avoidance scheme, the BEPS Action plan 7 rec .....

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clusion of contracts. Similarly Action Plan 7 also recommends the introduction of an anti fragmentation rule as per paragraph 4.1 of Article 5 of OECD Model tax conventions, 2017 so as to prevent the tax payer from resorting to fragmentation of funct .....

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een included in Article 12 of Multilateral Convention to Implement Tax Treaty Related Measures (herein referred to as MLI ), to which India is also a signatory. Consequently, these provisions will automatically modify India s bilateral tax treaties c .....

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(i). Similarly, the antifragmentation rule introduced as per paragraph 4.1 of Article 5 of the OECD Model Tax Conventions, 2017 has narrowed the scope of the exception under Article 5(4), thereby expanding the scope of PE in DTAA vis-a-vis domestic p .....

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d prevail over corresponding provisions in the DTAAs, to the extent they are beneficial. Since, in the instant situations, the provisions of the domestic law being narrower in scope are more beneficial than the provisions in the DTAAs, as modified by .....

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