India Proposal for Amendment of Rules for Profit Attribution to a Permanent Establishment
We have submitted comments on the proposal from India’s Central Board of Direct Taxes to amend the rules on attribution of profits to a permanent establishment, available here.
We commend the CBDT on this proposal, that would introduce a fractional apportionment method for allocation of MNE profits, and provide simplicity, predictability and fairness. Our comments include suggestions for complementing these measures with strengthening of the profit split method for allocation of MNE profits to subsidiaries. This approach offers a roadmap for comprehensive reforms currently debated internationally.
The proposal is modelled on formulary apportionment systems used elsewhere, such as for state taxation in the USA, and the EU’s proposed common consolidated corporate tax base. It would be simple and easy to administer, while resolving most of the problems of taxation of multinationals. While more work is needed on technical details, we strongly support this initiative, and urge international tax specialists from other governments as well as business to engage constructively and ensure its success.