From Press Trust of India

New Delhi, Apr 26 (PTI) The actual tax liability of foreign investors towards MAT may be much lower than Rs 603 crore, estimated by the revenue department, as many of them would get the benefit of double taxation avoidance pacts.

“The number of FIIs and the amount involved would come down substantially as many of them would be eligible for treaty benefits,” a Finance Ministry source told PTI.

Following a ruling by the AAR, the revenue department has sent notices to 68 foreign institutional investors (FIIs) for payment of dues totalling Rs 602.83 crore towards Minimum Alternate Tax (MAT).

These, according to sources, also include FIIs which are eligible for benefits under the Double Taxation Avoidance Agreements (DTAA) which many countries have with India.

They say FPIs based in jurisdictions like Cayman Islands, Hong Kong and British Virgin Islands will have to pay 20 per cent MAT as there is no DTAA.

“FIIs from Cayman Islands, Hong Kong and BVI may however continue to be hit by the MAT provisions as India does not have a tax treaty with these countries. The actual tax liability may be much lower in view of treaty relief that is now sought to be provided,” PwC Partner (Tax and Regulatory Services) Suresh Swamy said.

The actual tax liability may be much lower as Mauritius, Singapore and the Netherlands based Foreign Portfolio Investors (FPI) would also be exempted from payment of MAT, industry experts said.

Further, those FPIs based out of other countries, including Australia, UK and the US, which have DTAA with India would also be eligible for treaty benefits once they provide the tax authorities with residency proof.

“Domestic tax law applies only to the extent it is beneficial over the Treaty. MAT should therefore not apply to FIIs based in treaty countries,” Swamy added.

Seeking to quickly resolve the controversial tax issue facing FPIs, the tax department has directed top officials that all claims coming under the ambit of DTAAs will be settled within a month of being filed.

“It has been decided that in all cases of foreign institutional investors (FIIs) seeking treaty benefits under the provisions of respective DTAAs, decision may be taken on such claims within one month from the date such claim is filed,” the Central Board of Direct Taxes (CBDT) said.

For more on this story go to: http://www.ptinews.com/news/5961104_-FII-tax-liability-to-be-much-lower-post-DTAA-benefits–.html

Related story:

Rs 40,000 crore tax: What is this MAT issue that FIIs are lamenting about?

From dna India

Minimum Alternate Tax (MAT) is a tax levied on short- and long-term capital gains and interest income.

The stock markets have been on the downside since the Indian tax department asked foreign institutional investors (FIIs) for Rs 40,000 crore in taxes. No one was expecting this tax demand as the new government had clearly stated that Minimum Alternate Tax (MAT) will be abolished from April 1, 2015.

What is this MAT issue pertaining to FIIs, then?

This Rs 40,000 crore demand is a tax pertaining to years before Finance Minister Arun Jaitley announced scrapping of MAT. Therefore, the tax demand is legitimate although it is likely to hurt investment sentiments.

CLSA, in a report dated April 19, 2015 said ,”Clearly, India is not completely out of the ‘tax claims pertaining to prior years’ syndrome yet.”

What is MAT?

Minimum Alternate Tax (MAT) is a tax levied on short- and long-term capital gains and interest income.

The tax rate is 20% and goes back as far as Financial Year 2009.

What is the Government asking?

CLSA said, “Government officials are largely going by the precedent of the case of Castleton Investments, wherein the Authority for Advance Ruling (AAR) gave a verdict in August 2012, that Castleton is liable to pay MAT when it transferred shares from a Mauritius entity to a Singapore entity. The case is currently with the Supreme Court. If the Supreme Court upholds the AAR ruling then the case of the income tax authorities will become very strong. If the Supreme Court strikes down the AAR ruling, then the case will weaken considerably.
The government is simply asking funds to pay up the tax that is due to India. Finance Minister Arun Jaitley has said that total tax collection from this avenue could be in the range of Rs 40,000 crore and he could fund India’s irrigation projects for farmers with that money.

Moreover, the new government had clearly said that no new retrospective taxation cases will be opened but the ones currently underway will have to reach their logical conclusions.

Since this tax demand is of a period prior to abolishing MAT, the demand isn’t unjust.

Jaitley has reiterated that India is not a tax haven.

FIIs in India

Foreign Institutional Investors (FIIs) ownership in Indian equities was at an all time high of 20.7% as on December 31, 2014.

The investment jumped 40% from FY14 to FY15.

The US (32%) and Mauritius (22%) together account for 50% of the total foreign investments in India followed by Singapore and Luxembourg at 9% each.

IMAGE: Representational image File Photo dna Research & Archives

For more on this story go to: http://www.dnaindia.com/money/report-what-is-this-mat-issue-that-fiis-are-lamenting-about-2080234