Concept of POEM

Earlier provisions under Income Tax Act, 1961 (‘Act’)

Company is resident if: during that year, the control and management of its affairs is situated wholly in India

New provision under the Act

Company is resident if place of effective management in that year is in India

POEM means a place where:

  • Key management and commercial decisions
  • that are necessary for conduct of business
  • of an entity as a whole
  • are in substance made

Intention - Explanatory Memorandum to Finance Bill 2015

Curb the creation of shell companies which are incorporated outside India but controlled & managed from India

Align ‘residency’ concept with International standards & Double Taxation Avoidance Agreements (‘DTAAs’) entered into by India