Presumptive tax plan raises double-taxation worry

NITI Aayog's recent suggestion to introduce an optional presumptive taxation scheme for foreign companies has sparked debate among tax experts.

- PUSHPITA DEY @ New Delhi

They warn that the proposal could conflict with the existing international tax norms and potentially lead to double taxation.

NITI Aayog suggests that the government could consider allowing foreign companies to pay taxes under a presumptive system, as an alternative to the existing profit attribution rules. However, experts argue that such a system may diverge from the globally accepted functions, assets, and risks (FAR)- based attribution framework, central to determining taxable profits for multinational enterprises operating through a Permanent Establishment (PE).