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India-Japan Social Security Agreement (“SSA”) to be effective from 1 October 2016

Global Tax Update:August 2016/India

Governments of India and Japan signed the SSA on 16 November 2012 subject to certain pending administrative procedures. The governments have now exchanged ‘Note Verbale’ and announced that SSA will come into force from 1 October 2016. (Global Tax Update:August 2016/India)

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1. India-Japan Social Security Agreement (“SSA”) to be effective from 1 October 2016

Governments of India and Japan signed the SSA on 16 November 2012 subject to certain pending administrative procedures. The governments have now exchanged ‘Note Verbale’ and announced that SSA will come into force from 1 October 2016. 

SSA is expected to favorably impact Indian and Japanese companies as it would reduce the cost of doing business. Also a significant number of Indian and Japanese nationals will benefit from the SSA.

2. Indirect Transfer Tax Rules

The Central Board of Direct Taxes (CBDT) has issued rules providing for a valuation mechanism, determination of proportionate income taxable in India, forms for reporting compliance and details of documents to be maintained by the Indian concern in respect of indirect share transfer transactions.

The rules provide clarity on the manner of determination of fair market value and methodology for computation of income arising from indirect transfers. However, the rules are complex and cast an onerous obligation on the Indian concern for maintaining extensive documentation. These rules have come into force from 28 June 2016. It is recommended that India tax experts are consulted before applying the rules and taking positions.

 

>> Click for Japanese [日印社会保障協定:2016年10月1日に発効 ほか]

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