Foreign Firms in India: Tax Disputes and the Way Forward

 

India has rapidly emerged as a major global investment destination, driven by a large consumer base, skilled workforce and a growing digital economy. Foreign direct investment (FDI) inflows have consistently increased over the past decade, reflecting confidence in India’s economic potential.

Reforms and Responses

Digitization and Transparency

• Introduction of Faceless Assessments and Appeals.
• Use of AI and analytics in compliance checks.

Tax Treaty Revisions

• India renegotiated several tax treaties (e.g., with Mauritius, Singapore) to prevent treaty abuse.

Advance Pricing Agreements (APA) and Mutual Agreement Procedure (MAP)

• Increasing use of APAs to reduce transfer pricing disputes.
• Streamlined MAP framework with treaty partners.

Lessons Learned

• Legal Certainty is Crucial:
  Retrospective laws can severely damage investor trust.
• Importance of Dispute Resolution Mechanisms:
  Efficient, transparent and quick resolutions encourage compliance and investment.
• Policy Consistency Matters:
  Frequent changes to tax laws create a perception of instability.
• Stakeholder Engagement:
  Proactive communication with businesses can avoid litigation.

Want to know more check the full blog here- https://uja.in/blog/taxation-times/foreign-companies-tax-disputes-in-india-key-takeaways/