WORDS IN THE ARTICLE
Mutual Agreement Procedure (MPA): The principal function of the Mutual Agreement provision in Article 25 is to resolve situations of double taxation caused by differences in interpretation and application of the treaty. It is according to the Article 25 of the United Nations. Article 25 establishes a “mutual agreement procedure” (MAP) which enables the parties to a bilateral treaty to better carry out the interpretation and application of the substantive treaty provisions. The MAP is administered by the “competent authorities”, the persons (Ministry or Tax Authority).
WHAT IS THE ISSUE
⇒ India Tax authorities had issued a notice to Nokia to pay Rs. 2,058 for alleged tax evasion which it didn’t pay during the period from 2006. This particular factory was started by Nokia in 2006.
⇒ Nokia has been charged with nonpayment of withholding tax on royalties earned on import of software. The Income Tax Department had slapped a notice on Nokia’s Tax Issue Indian subsidiary for violating withholding tax norms since 2006 while making royalty payments to its parent company in Finland. (Nokia is a company belonging to country Finland). In short, Nokia produced mobile phones here. In it software was added. Royalty for this software was paid to its parent company in Finland which is actually the tax evasion.
⇒ But with recent calculation, Income Tax department is saying that Nokia owes Rs. 21,153 crore towards liabilities arising from a seven-year period, because of failing to deduct TDS from royalty payments made to the parent company.
⇒ Now Nokia was going to sale its Indian assets to Microsoft. Fearing that Nokia would flee India without settling tax dispute, income tax department froze all the assets of Nokia in India.
INDIA AND FINLAND
⇒ India wants’ its tax evaded money.
⇒ Finland on the other hand is claiming that the royalty money belongs to it & how India can have a right over it.
About the recent verdict
⇒ Indian court recently accepted the plea of Nokia to release the Chennai based local factory which is the biggest manufacturing facility of Nokia & which is a part of the deal between Nokia & Microsoft.
⇒ But it is conditional. Nokia will have to deposit Rs. 2,250 crore as a conditional amount for security purpose.
⇒ Now Nokia can sell its assets to Microsoft.
⇒ The court also said that Microsoft will not be liable to pay Nokia’s India tax dues and that it can buy Nokia’s assets as long as relevant conditions are met.
⇒ This verdict protects the interest of both the parties i.e. Income Tax department (by taking some amount as a security deposit from Nokia) & of Nokia (by allowing it to sale Chennai based plant. As the agreement between Microsoft & Nokia had the deadline of December 12).
⇒ This issue can be solved by use of Mutual Agreement Procedure (MPA) provision provided that things move fast.
WHAT NEEDS TO BE DONE FOR THE FUTURE TO PROTECT INVESTMENTS
⇒ India should develop a robust and fair dispute resolution mechanism for cross-border disputes.
⇒ Income tax department plans to have dedicated tax officers to solve such matters which is a good step.
⇒ The need is also for qualitative upgradation and training of manpower to deal with tax disputes.
Mutual Agreement Procedure (MPA): The principal function of the Mutual Agreement provision in Article 25 is to resolve situations of double taxation caused by differences in interpretation and application of the treaty. It is according to the Article 25 of the United Nations. Article 25 establishes a “mutual agreement procedure” (MAP) which enables the parties to a bilateral treaty to better carry out the interpretation and application of the substantive treaty provisions. The MAP is administered by the “competent authorities”, the persons (Ministry or Tax Authority).
WHAT IS THE ISSUE
⇒ India Tax authorities had issued a notice to Nokia to pay Rs. 2,058 for alleged tax evasion which it didn’t pay during the period from 2006. This particular factory was started by Nokia in 2006.
⇒ Nokia has been charged with nonpayment of withholding tax on royalties earned on import of software. The Income Tax Department had slapped a notice on Nokia’s Tax Issue Indian subsidiary for violating withholding tax norms since 2006 while making royalty payments to its parent company in Finland. (Nokia is a company belonging to country Finland). In short, Nokia produced mobile phones here. In it software was added. Royalty for this software was paid to its parent company in Finland which is actually the tax evasion.
⇒ But with recent calculation, Income Tax department is saying that Nokia owes Rs. 21,153 crore towards liabilities arising from a seven-year period, because of failing to deduct TDS from royalty payments made to the parent company.
⇒ Now Nokia was going to sale its Indian assets to Microsoft. Fearing that Nokia would flee India without settling tax dispute, income tax department froze all the assets of Nokia in India.
INDIA AND FINLAND
⇒ India wants’ its tax evaded money.
⇒ Finland on the other hand is claiming that the royalty money belongs to it & how India can have a right over it.
About the recent verdict
⇒ Indian court recently accepted the plea of Nokia to release the Chennai based local factory which is the biggest manufacturing facility of Nokia & which is a part of the deal between Nokia & Microsoft.
⇒ But it is conditional. Nokia will have to deposit Rs. 2,250 crore as a conditional amount for security purpose.
⇒ Now Nokia can sell its assets to Microsoft.
⇒ The court also said that Microsoft will not be liable to pay Nokia’s India tax dues and that it can buy Nokia’s assets as long as relevant conditions are met.
⇒ This verdict protects the interest of both the parties i.e. Income Tax department (by taking some amount as a security deposit from Nokia) & of Nokia (by allowing it to sale Chennai based plant. As the agreement between Microsoft & Nokia had the deadline of December 12).
⇒ This issue can be solved by use of Mutual Agreement Procedure (MPA) provision provided that things move fast.
WHAT NEEDS TO BE DONE FOR THE FUTURE TO PROTECT INVESTMENTS
⇒ India should develop a robust and fair dispute resolution mechanism for cross-border disputes.
⇒ Income tax department plans to have dedicated tax officers to solve such matters which is a good step.
⇒ The need is also for qualitative upgradation and training of manpower to deal with tax disputes.
No comments:
Post a Comment