Withdrawal of past PF accumulations permissible, EPFO clarifies for Japanese international workers
Global Tax Update : October 2017 / India
This issue of our newsletter explains "Withdrawal of past PF accumulations permissible, EPFO clarifies for Japanese international workers" and "Restriction on number of layers of subsidiaries under 2013 Act". (Global Tax Update:October 2017/India)
1. Withdrawal of past PF* accumulations permissible, EPFO** clarifies for Japanese international workers
Social Security Agreement between India and Japan (“SSA‟) has become effective from October 1, 2016. One of the benefits provided under the SSA relates to withdrawals of past contributions to PF and pension by Japanese nationals.
* Provident Fund – India’s social security contribution is referred as Provident fund. Both the employer and employee are required to make contributions towards provident fund provided certain conditions are satisfied.
** Employer Provident Fund Organization
2. Restriction on number of layers of subsidiaries under 2013 Act***
To check misuse of multiple layers of subsidiaries for diversion of funds and siphoning off funds, the 2013 Act**** :
- Prohibits prescribed holding companies from having layers of subsidiaries beyond prescribed numbers; and
- Requires that no investments can be made through more than two layers of investment companies.
*** Companies Act, 2013
**** These provisions were sought to be omitted from the 2013 Act on the recommendation of the Companies Law Committee (CLC) set up by the Ministry of Corporate Affairs (MCA). CLC felt that these restrictions may become too obtrusive and impractical in the modern business world, and have a substantial bearing on the structuring and the ability of companies to raise funds. Subsequently, in view of reports of misuse of multiple layers of companies, where companies create shell companies for diversion of funds or money laundering, the government decided to retain these provisions and placed a draft notification of the Rules to be prescribed, for public comments in June 2017.