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India's 2013 Budget Highlights - by Alex Feness 

Global Tax Adviser

 

March 12, 2013

 

Alex Feness
Toronto, International Corporate Tax

 

India delivered its 2013-14 budget on February 28, 2013. Among other changes, the budget increases the withholding tax rate and the corporate tax rates for foreign companies with a permanent establishment in India. This article discusses certain international tax highlights of the budget.

Corporate and business tax measures

 

India's budget:

 

  • Increases the withholding tax rate in the Indian domestic law on royalties and fees for technical services to 25% (from 10% and 20%, respectively) as of April 1, 2013
  • Increases the "effective" corporate tax rates for foreign companies having permanent establishments in India to a maximum of 43.26% (from 41.2%)
  • Requires that taxpayers produce a Tax Residency Certificate to demonstrate "residency" in an overseas jurisdiction to be able to claim tax treaty benefits
  • Levies a 22.66% tax on investors who invested in India through tax favourable jurisdictions (e.g., Mauritius, Cyprus, Singapore) to repatriate profits from its unlisted Indian affiliates via a buyback of its equity shares rather than via dividends
  • Defers implementation of India's proposed GAAR by two years to financial year 2015-16.

 

For more information, contact your KPMG adviser.

 

 

 

 

 

Information is current to March 12, 2013. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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