Further Clarity On POEM Guidelines

Regional Head Office in India – Implications Explained

The introduction of the place of effective management' (POEM) test for determining corporate tax residency was a key recent change to Indian taxation laws. The Central Board of Direct Taxes (CBDT) has recently issued Circular (No. 25 of 2017, dated 23 October 2017) (Clarification), yet another clarification to ensure that the new POEM rule is applied smoothly without adversely affecting non-resident taxpayers. Vide the Clarification, the CDBT has clarified the POEM implications of a company having its regional headquarters in India vis-à-vis decision-making by its Board of Directors (Board). Previously, the CBDT had issued the 'Guidelines for the determination of POEM' (Guidelines) as well as the de minimus threshold (INR 500 million of turnover or gross receipts) for the application of the POEM test.