Seeking Feedback on Draft Guidelines to Determine Place of Effective Management (POEM)

Update: Date to submit feedback on guidlines have been extended, you may please send in your feedback by 8th Jan 2016.

The long awaited guidelines on determining the Place of effective management (POEM) are released by CBDT. You can assess a copy of the guidance note from here :

You would recall that the provision of residency norm as POEM was introduced in the Finance Act 2015 and NASSCOM had in consultation of the industry made suitable recommendations to the MOF. While the draft guidelines seek to provide a detailed set of factors to be considered for determination of POEM there could be some more parameters / comments for determining POEM required for an effective implementation.

Some of the noteworthy proposals are as follows:

1. Process of determination of POEM will primarily be based on whether the company is engaged in active business outside India.

2. A company can be said to be engaged in active business outside India if the following cumulative conditions are satisfied:

  • Its passive income (income by way of royalty, dividend, capital gains, interest, rents and income from purchase/sale of goods from/to associated enterprises) is not more than 50% of its total income;
  • Less than  50% of its total assets are situated in India;
  • Less than 50% of its total number of employees are situated in India or are resident in India; and
  • Payroll expenses incurred on such employees is less than 50% of its total payroll expenditure.

3. Two stage process for determination of POEM for companies that are not engaged in an active business outside India:

  • Stage 1 involves the identification of the persons who actually make the key management and commercial decisions for the conduct of the company’s business as a whole;
  • Stage 2 involves determination of the place where the decisions are in fact being made

4. Factors that are not determinative of POEM:

  • The fact that a foreign company is wholly owned by an Indian company 
  • The fact that one or some of the directors of a foreign company reside in India
  • The fact that local management is situated in India in respect of activities carried out by a foreign company in India
  • The existence in India of support functions that are preparatory and auxiliary in character

We seek your comments and inputs on the guidelines.  Please share your comments by 29th December 2015 to Shweta Bhutan at

Look forward to your response.



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