Overview

• NITI Aayog released a tax policy working paper proposing an optional presumptive regime for permanent establishments of foreign companies in India.
• Under the plan, firms could opt to be taxed on a pre-set, industry-specific percentage of gross Indian revenue rather than undergo case-by-case profit attribution.
• Participants would receive a safe harbour that bars separate PE litigation for the covered activity and would not need to maintain detailed local accounts for it.
• The paper outlines opt-in and opt-out mechanics, allowing companies to file regular returns if actual profits fall below the deemed rates.
• Recommendations include codifying PE and attribution rules in domestic law aligned with global norms, avoiding retrospective changes, training tax officers, consulting stakeholders, and considering inclusion in a forthcoming Finance Bill, with no changes enacted yet.