CBDT Issues Final Guidelines For Determination Of ‘Place Of Effective Management'

In December 2015, the Central Board of Direct Taxes (CBDT) issued draft guidelines for determination of 'Place of Effective Management' (POEM) of a foreign company (Draft Guidelines) and had invited comments and suggestions from the stakeholders. The CBDT has on 24 January 2017 issued the final guidelines for determination of POEM (Guiding Principles).

The key features of the Guiding Principles are set out below.

Determination of POEM | Approach

• Factual determination, based on 'substance' not the 'form', taking a holistic approach and a year to year determination
• Primarily based on whether the foreign company is engaged in 'active business outside India'

The Guiding Principles provide that if a company is engaged in 'active business outside India', the POEM would be presumed to be outside India if the majority of the meetings of the board of directors of the company are held outside India.