What is SEP New Tax Amazon, Netflix, Facebook, Whatsapp, Google
New Tax For Foreign Companies in India!
The new Finance Act 2018 has incorporated a special provision of tax for those companies which have ‘Significant Economic Presence’ (SEP).
SEP is the new category of tax which can be imposed on all foreign companies which are operating in India, and offering their services to Indians.
Generation of revenues is an important aspect, and this can be a debatable issue, because except Netflix and some other companies, none of the above mentioned companies are charging anything from Indians to use their platforms.
These special tax provisions will now come under Income Tax Act under Section 9(1)(i) and covers all foreign companies operating in India – This is not exclusive only for tech companies.
Infact, this new tax category of SEP is applicable for taxing non-resident in Indians, who are operating a company or offering service. In the Finance Act 2018, Govt. has increased the scope of ‘Business Connection’, and after this, the changes of taxing these companies have increased.
However, the taxation won’t start immediately.
Govt has asked industry views and opinions on the proposal to tax non-residents in India, basis on three aspects.
Three Aspects Under Which Taxation Will Be Considered!
The first aspect which Income Tax Dept. will consider before taxing foreign companies is the revenue threshold, in respect to any goods or services offered to Indians. Income Tax Dept. wants to know whether any such revenue threshold exist, after which taxes can start.
Second aspect is revenue threshold, in respect to digital goods or software being downloaded, irrespective of physical goods sales.
Hence, this can cover most of IT based companies or tech startups, where digital data exchange is concerned. Income Tax Dept. wants to know whether any such threshold of revenue generation in exchange of digital data exchanges can exist?
And the third aspect is the number of users and their threshold in-respect to business services or goods being offered. This can cover most of the free apps, because now, Govt. can consider the number of users of a service, rather than the actual revenue generated.
Businesses and shareholders are asked to share their feedback and suggestions with the IT Dept. before August 10th.
Do you think this additional taxation is necessary? How will companies like Facebook, Whatsapp, Netflix, Google and Twitter react now?
