The Central Board of Direct Taxes(CBDT) appointed committee has proposed a change in the methodology for taxing multinational companies(MNCs),including digital firms having permanent establishment in India.
Earlier,CBDT had set up a committee to bring greater clarity and predictability for taxing MNCs having permanent establishment in India.
The MNC having a fixed place of business in India is considered as having a Permanent Establishment(PE) in India and is taxed as per domestic laws.
The committee has said that the sales,employees (manpower and wages) and assets in India of multinational companies(MNCs) should be taken into account for determining domestic tax liability.In case of digital companies,the weightage will also be given to an additional fourth criteria also which is of ‘user’ base.
The Committee has also proposed that MNCs that are incurring global losses or a global profit margin of less than 2% and have operations in India will be deemed to have made a profit of 2% of Indian revenue or turnover and should be taxed accordingly.