Corporate Updates – 09-02-2016

RBI – FEMA:

RBI had notified the Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2015 and old regulations have been repealed and replaced by the new regulations. These regulations seek to regulate opening and maintenance of foreign currency accounts in and outside India by a person resident in India. A person resident in India may open, hold and maintain with an authorized dealer in India the Exchange Earner’s Foreign Currency (EEFC) Account, Resident Foreign Currency (RFC) Account, Resident Foreign Currency (Domestic) [RFC(D)] Account and Diamond Dollar Account (DDA). Further, the list of persons who can open can open foreign currency accounts in and outside India has also been prescribed. A Foreign Currency Account with an authorized dealer in India under these Regulations may be opened, held and maintained in the form of current or savings or term deposit account in cases where the account holder is an individual, and in the form of current account or term deposit account in all other cases. The account can be held singly or jointly in the name of person eligible to open, hold and maintain such account.

CBDT – Income Tax:

The Central Board of Direct Taxes (CBDT) has entered into two bilateral Advance Pricing Agreements (APAs) with United Kingdom on 29th January, 2016. The APAs have been entered into soon after the Competent Authorities of India and United Kingdom finalised the terms of the bilateral arrangement under the Mutual Agreement Procedure (MAP) process contained in the India-UK DTAA. The APAs cover the period 2013-14 to 2017-18 and also have a “Rollback” provision for 2 years (2011-12 and 2012-13). Transfer pricing disputes on the same transaction were recently resolved under MAP for each of these two companies for the years 2006- 07 to 2010-11. With the signing of the bilateral APAs, the two Indian companies have been provided with tax certainty for 12 years each (5 years under MAP and 7 years under APA). This is a significant step towards providing a stable and predictable tax regime. The two APAs are also significant because they address the issues of payment of management & service charges and payment of royalty. These transactions generally face prolonged and multi-layered transfer pricing disputes. With this signing, CBDT has so far signed 41 APAs out of which 38 are unilateral and 3 are bilateral.

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