India’s tax authority has extended the earlier deadline of August 10 to submit comments on the newly introduced “significant economic presence” test to tax profits of foreign businesses.
The new deadline to submit comments is September 30.
“Significant economic presence” is defined under section 9 of the Income Tax Act to mean a transaction (including provision of download of data or software) carried out by a foreign enterprise in India, if the aggregate of payments arising from such transaction(s) during the year exceeds a prescribed amount.
Further, the systematic and continuous soliciting of business activities or engaging in interaction with a prescribed number of users by a foreign enterprise in India through digital means also constitutes ‘significant economic presence’ in India of such foreign enterprise.
The tax authority is particularly seeking suggestions and comments from stakeholders on the revenue and user-based thresholds that should be prescribed in this regard.
India is one of the first tax jurisdictions to treat “significant economic presence” of a foreign enterprise as its taxable presence in India (effective from April 1, 2018, that is, from assessment year 2019-20).