Likely Focus Area — Beneficial Ownership

This year while presenting the Budget, the Indian Finance Minister observed that the Tax Residency Certificate (TRC) certifies that an entity is a resident but it does not certify that it is a beneficial owner. Beneficial ownership is a question of fact, he mentioned.

This remark has, lead to speculation that the Indian tax authorities could now examine beneficial ownership aspect in greater details, when Tax Treaty (Treaty) relief is sought in case of passive incomes. It is pertinent to note that in case of incomes such as interest, royalty, fees for technical services and dividend, requirement of beneficial ownership is an important inbuilt criterion, which has to be fulfilled to avail Treaty benefit.