Tax Law to be amended retrospectively to provide relief to foreign firms

New Delhi, September 24 : India is likely to waive imposition of a Minimum Alternative Tax (MAT) on foreign companies, the Finance Ministry stated on Thursday, while trying to address stagnating tax concerns that have made investors circumspect in committing fresh funds.
Government will amend the Income Tax Law with retrospective effect in order to exempt foreign companies, covered under double taxation avoidance agreements, from MAT, the Ministry said.
The amendment, effective from April 1, 2001, will also provide relief to foreign firms that are not registered or do not have a permanent establishment in the country.
The decision comes weeks after Finance Minister Arun Jaitley accepted the recommendations of a government panel for giving the tax waiver to foreign portfolio investors.
MAT was first introduced in India in the 1990s to ensure that companies paid a minimum amount of tax, normally around 20 percent of profits.
However, it had not been imposed on foreign investors until last year when tax officials, citing a court ruling, started sending notices to foreign funds, including Aberdeen Asset Management.
Foreign investors have long been critical of India’s tax bureaucracy, citing aggressive claims that have led to damaging rows with companies including Vodafone and more recently, Cairn India.