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Multinational enterprises must provide income details

India has recently agreed to Oecd's action plan on the Base erosion and profit shifting project. It is expected that a provision will be introduced by the Indian government this year to give effect to the Oecd guidelines which will require country by country reporting.

Q: My company is part of a multinational group. I am told that in India more details will be required to be furnished by multinational enterprises giving details of global income earned. I am not aware from which year this has been made applicable.
- C K Daga, Dubai
A: India has recently agreed to Oecd's action plan on the Base erosion and profit shifting project. It is expected that a provision will be introduced by the Indian government this year to give effect to the Oecd guidelines which will require country by country reporting. This will enable tax authorities in India to have access to the multinational group's value chain. Such reporting will require multinational enterprises to provide information every year in respect of each country where they do business.
Global allocation of income and taxes paid will have to be done. The object of this exercise is to prevent companies from shifting profits to low tax or no tax jurisdictions. It is expected that from the financial year 2016-17 minimum standards of the action plan will be implemented. All multinational enterprises which are liable to pay tax in India and have an annual consolidated group revenue of ?750 million or more will be required to comply with the country by country reporting requirements.
Q: My wife is planning to return to India in the next financial year. She has a bank account in Qatar for many years. I have advised her to repatriate the money to India when she returns. However, she insists on keeping her past savings in foreign currency. Can she do so after she leaves the Gulf?
- T K Naidu, Doha
A: Your wife has three options. The first is to remit all the funds to India and convert the same to Indian Rupees. She would also be permitted to retain her present bank account in Doha. The third option will be for her to repatriate the funds to India and deposit them in a Resident Foreign Currency (RFC) account. Her existing FCNR/NRE deposits can also be deposited in the RFC account. Most banks allow returning NRIs to open a RFC account in Dollar, Euro or Pounds Sterling. Some banks also permit deposits in Japanese Yen, Australian or Canadian Dollars. The rates of interest will vary depending upon the currency of the deposit.
So long as your wife is resident but not ordinarily resident after her return to India, she will not be liable to pay tax on the interest earned on the foreign currency accounts. However, from the financial year in which she becomes resident and ordinarily resident, tax will be payable on her global income. Apart from deposits in a savings bank account, term deposits of one to three years tenure are also allowed by some banks. Banks also require maintenance of a stipulated quarterly balance in the designated foreign currency.
Q: My family members and I have recently become shareholders in a public limited company in India. The company has proposed to change its objects clause. However, we are not agreeable as it may adversely affect the working of the company in future. Some of our friends have also joined us in the protest. What advice do you have in this situation?
- P K Mantri, Sharjah
A: The Companies Act 2013 provides that companies which have raised money from the public by issue of prospectus cannot change their objects for which the money was raised, unless the company passes a special resolution. Even where a special resolution is passed, the dissenting shareholders are provided with an exit route. Therefore, shareholders who do not agree with the company's proposal to change the objects for which the funds were raised have to be mandatorily given an opportunity to surrender the shares back to the company.
It is further provided by the Securities & Exchange Board of India that the exit price will be calculated in accordance with the rules set out in the takeover regulations. The shareholders who are given the exit opportunity are those who are holding shares on the date of the board meeting at which the change in objects was approved. This provision applies in cases where the proposal to change the objects is dissented by atleast 10 per cent of the shareholders of the company.
Q: Indian banks are under great stress at present. Are they being pushed sufficiently hard for implementing international financial reporting standards?
- C Kanungo, Muscat
A: Indian accounting standards are being made mandatory which converge with international financial reporting standards. Ind AS are made mandatory for the accounting year beginning on 1st April, 2018. Therefore, banks are permitted to adopt Ind AS according to specified time frame. The first step is to ensure adequacy of capital by applying Basel III Capital Adequacy Norms. Quarterly progress reports have to be submitted to the Board of Directors of each bank. The Reserve Bank of India has directed banks to set up a steering committee which will be headed by an Executive Director to immediately initiate the implementation process. The audit committee of the bank's board has been advised to oversee the implementation process. Further, banks are required to submit pro forma Ind AS financial statements to the Reserve Bank commencing from the half-year ending on September, 30 2016.
The writer is a practicing lawyer, specialising in tax and exchange management laws of India.