Why is foreign tax credit an issue of importance for tax policy?
Currently, Indian domestic tax legislation does not contain any guidelines with respect to foreign tax credits with tax treaty countries. This typically could, inter alia, lead to instances of double taxation of a particular stream of income and denial/reduction of foreign tax credit as well. With Indian companies increasingly going global, clear legislation as part of the domestic tax law would be required which could potentially address, among others, the following aspects: Credit of taxes not covered by a tax treaty. Varying audit periods. Varying basis of audits. Conflict in determining source of income. Change in characterisation of income. Claim of an appropriate tax credit on a worldwide basis. Obviously, the absence of clarity on foreign tax credits does not contribute to successful outbound investment of Indian companies. Do you think LLPs will be a popular idea in India? Yes. LLPs could operate as an effective business vehicle into India as they combine the organisational fle
