The Union Budget 2016 introduced a special 'royalty
tax' which the tax rate on income earned from patents is 10%
(vs. 30% after deducting expenses). The objective is to encourage
domestic research and development with an aim to make India an
innovation hub. The benefit will be available across
knowledge-based sectors, including automotive, electronics and
Resident shareholders, whether individuals or companies, who
earn dividend income of more than Rs 10 lakh (approximately USD
15,000) a year, will now have to pay tax on such income at a flat
rate of 10%. Foreign investors who are non-tax resident of India
are not subject to this newly introduced tax.
An amnesty program, Income Declaration Scheme, is offered from
1 June 2016 to 30 September 2016 for domestic taxpayers to rectify
their past non-compliance of undisclosed income. There will be no
questions being asked, no scrutiny and no prosecution to those who
come forward to clear up past non-compliance by paying tax at 30%,
a surcharge at 7.5% and a penalty at 7.5%, totalling 45% of
In line with the recommendations contained in the OECD BEPS
report on Action 13, India will adopt the three-tiered transfer
pricing documentation structure consisting of (1) a master file
containing standardized information relevant for all MNE group
member; (2) a local file
referring specifically to material transactions of the local
taxpayer; and (3) a country-by-country ("CbC") report
containing certain information relating to the global allocation of
the MNE's income and taxes paid together with certain
indicators of the location of economic activity within the MNE
group. The CbC will enter into force from1 April 2017 and apply to
MNE with consolidated group turnover of more than EURO 750 million
(or equivalent local currency).
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guide to the subject matter. Specialist advice should be sought
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On September 30, 2016, the VAT authorities confirmed that VAT shall apply to directors' fees.
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