Our Work
The Multilateral Instrument (MLI), a key outcome of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project, offers an innovative solution to modernize international tax treaties. It allows countries to swiftly implement BEPS measures across existing bilateral tax agreements without renegotiating each treaty individually. The MLI aims to enhance global tax compliance, curb tax avoidance, and improve dispute resolution processes, creating a more transparent and fair tax environment. This project explores the MLI's role in combatting BEPS, its adoption process, and its significance in reinforcing international tax cooperation.
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International Taxation & Transfer Pricing: Associate Enterprises and Global Compliance
This website is a comprehensive resource dedicated to understanding the role of associate enterprises in international taxation. It explores key principles outlined in Article 9 of the OECD Model Tax Convention, focusing on transfer pricing, tax planning, and global compliance strategies. The site breaks down complex concepts such as the arm's length principle, Base Erosion and Profit Shifting (BEPS), and the OECD’s evolving guidelines on profit allocation.
Through in-depth analysis, real-world case law (with focus on landmark Indian decisions), and insights into regulatory measures like Country-by-Country Reporting (CbCR) and the Multilateral Instrument (MLI), the website aims to educate tax professionals, legal experts, students, and policymakers. It emphasizes transparency, fairness, and international cooperation in cross-border tax arrangements.
The website also features a section dedicated to transfer pricing methods, including CUP, RPM, CPM, TNMM, and PSM, and how these are applied to ensure compliance and minimize disputes between multinational enterprises and tax authorities.
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Understanding Permanent Establishment (PE) in International Taxation: Key Concepts and Latest Developments
Permanent Establishment (PE) is a foundational concept in international taxation, used to determine when a foreign company becomes liable to pay tax in a country where it operates. Traditionally, PE refers to a fixed place of business—such as a branch, office, or construction site—through which an enterprise conducts its business activities. Both the Indian Income Tax Act and the OECD Model Tax Convention define PE and outline the conditions under which foreign income becomes taxable in India or other jurisdictions.
With the growth of digital business models, the definition of PE has expanded to include Service PE, Dependent Agent PE (DAPE), and Virtual PE—even without a physical presence. The OECD’s BEPS project, particularly Pillar One and Pillar Two, seeks to modernize tax rules to capture digital economic activity and ensure fair profit allocation across countries.
Understanding PE is essential for multinational enterprises to manage tax risks and comply with cross-border tax regulations. It also plays a vital role for governments in protecting tax bases and preventing double taxation.
This evolving concept highlights the need for ongoing vigilance and strategic tax planning in the global economy.
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Double Taxation Relief: An Indian Perspective on Cross-Border Taxation
In an increasingly globalized economy, the risk of double taxation on cross-border income—being taxed in both the source and residence countries—poses challenges for businesses and individuals alike. India addresses these issues through both unilateral and bilateral relief mechanisms.
The Indian Income Tax Act, 1961 (Sections 90 & 91), empowers the government to enter into Double Taxation Avoidance Agreements (DTAAs) with other nations and to provide unilateral tax credits where treaties do not exist. Rule 128 further governs the computation of Foreign Tax Credit (FTC).
India has signed DTAAs with over 90 countries, incorporating provisions based on OECD and UN models—such as tax credits, exemptions, tax sparing, and underlying tax credits. Relief methods include:
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Credit Method (Ordinary, Full, Tax Sparing, and Underlying)
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Exemption Method (Full and with Progression)
The objective is to prevent unfair tax burdens, encourage cross-border trade and investment, and maintain fairness in the international tax system. India's use of bilateral treaties, unilateral relief, and MAP procedures ensures a structured approach to resolve tax disputes and eliminate double taxation.
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Article 26 of OECD Model Tax Convention: Information Exchange, Confidentiality, and Global Tax Cooperation
Article 26 of the OECD Model Tax Convention is a cornerstone provision enabling international cooperation through the exchange of tax-related information between countries. It promotes transparency, deters tax evasion, and ensures fair taxation by allowing tax authorities to access relevant financial data, including bank and ownership records.
The article enforces strict confidentiality requirements, ensuring that shared information is used solely for tax administration and enforcement, and disclosed only to relevant authorities. The 2024 OECD commentary further strengthens safeguards, addressing reflective non-taxpayer-specific information and outlining measures to ensure data privacy and prevent misuse.
Despite challenges like legal differences, data privacy concerns, and resource limitations, Article 26 has significantly improved global tax transparency, revenue collection, and equitable tax compliance.
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Understanding Article 26 of the OECD Model Tax Convention
Article 26 of the OECD Model Tax Convention is a crucial provision that enables international cooperation between countries in the fight against tax evasion and ensures fair tax administration. It facilitates the exchange of information between tax authorities, helping them detect tax evasion, enforce compliance, and enhance transparency in global taxation. The article emphasizes the importance of confidentiality, limiting the use of exchanged information solely for tax-related purposes. It also outlines the scope of information exchange, addressing bank secrecy, the use of information in legal proceedings, and the responsibilities of contracting states. Despite its importance, the implementation of Article 26 faces challenges, including legal and administrative barriers, data privacy concerns, and resource constraints. However, its impact on global tax compliance and fairness remains significant, promoting transparency and deterring tax evasion.
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Exploring the Mutual Agreement Procedure (MAP) in International Taxation
The Mutual Agreement Procedure (MAP) is a vital tool in international tax law under the OECD framework that allows tax disputes between two or more countries to be resolved through bilateral negotiations. MAP aims to prevent double taxation and offer tax certainty by providing a platform for competent authorities to collaborate and reach a solution, ensuring taxpayers are not unfairly taxed by multiple jurisdictions. This procedure plays an essential role in enhancing international tax cooperation, promoting cross-border investment, and fostering an environment of fair taxation.
The article outlines the history, principles, and mechanisms of MAP, along with the challenges it faces. Key discussions include its operational framework, its role in dispute resolution, and the significance of arbitration as a secondary option for unresolved disputes. The article also highlights recent OECD initiatives to improve the efficiency and accessibility of MAP, particularly through the BEPS Action 14 and the Multilateral Instrument (MLI).
This comprehensive guide to MAP helps businesses, taxpayers, and legal professionals understand its vital role in preventing double taxation and resolving cross-border tax disputes.
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Understanding the Multilateral Instrument (MLI): Strengthening Global Tax Cooperation and Combating BEPS
The Multilateral Instrument (MLI), developed by the OECD under the G20's BEPS initiative, aims to combat Base Erosion and Profit Shifting (BEPS) by offering a streamlined approach for countries to update their bilateral tax treaties. Instead of renegotiating treaties individually, the MLI allows countries to implement BEPS measures in a unified, efficient manner. Adopted in 2016 and entering into force in 2018, the MLI modifies over 2,000 tax treaties worldwide to address tax avoidance strategies such as treaty abuse, hybrid mismatches, and the artificial avoidance of Permanent Establishment (PE) status.
This website will provide an overview of the MLI's role in international tax reform, its objectives, key provisions (like the Principal Purposes Test, Hybrid Mismatches, and the Prevention of PE Abuse), India's adoption and ratification process, and the ongoing challenges in implementing the MLI. It will also highlight the importance of the MLI in enhancing tax fairness, transparency, and dispute resolution globally, contributing to the development of a more sustainable and efficient international tax system.