← Income Tax Strategy

Tax Architecture for
Corporate Groups

Multi-entity structures. Transfer Pricing scrutiny. International transactions. MAT planning. For corporations, tax is a strategic function that can create or destroy shareholder value.

Ideal for: Corporate groups with ₹200+ Cr revenue — MNCs, Listed Companies, PE-backed entities

The Corporate Tax Battlefield

At ₹200+ Cr scale, you're on the radar. Transfer Pricing Officer scrutiny. International Transaction scrutiny. MAT implications. The difference between competent and exceptional tax strategy can be ₹10+ Cr annually.

Transfer Pricing Adjustments

TPO adjustments of ₹50L-500 Cr are common in corporate groups. The penalty for non-compliance is 100-300% of tax on adjusted amount. Most groups have inadequate documentation.

Common Trigger:

Management fee paid to foreign parent at 5% of revenue without detailed benchmarking study = Adjustment + 200% Penalty

POEM Risk

Foreign holding companies managed from India may be deemed Indian resident, triggering taxation on global income. Many structures are inadvertently non-compliant.

Risk Indicator:

Singapore HoldCo with all directors in India, board meetings in India = Indian tax residency

MAT Trap

Companies with high book profit but low taxable income (due to deductions) still pay 15% MAT on book profit. Improper planning means losing MAT credit forever.

MAT Credit Expiry:

MAT credit expires in 15 years. Many companies lose crores in unutilized credit due to poor planning.

Section 79 Loss Lock

If shareholding changes >49%, accumulated losses are locked and cannot be carried forward. Many PE exits and restructurings trigger this inadvertently.

Planning Opportunity:

Strategic use of amalgamation (which preserves losses) vs. share sale (which doesn't) based on loss position.

Corporate Tax Architecture Services

Transfer Pricing

TP documentation. Benchmarking studies. Safe Harbor analysis. Master File and CbCR compliance. APA applications.

Prevents: TP adjustments and penalties

International Tax & DTAA

Treaty benefit optimization. POEM compliance. PE avoidance. Form 10F and TRC management. BEPS-ready structures.

Reduces: Cross-border tax leakage

MAT & Tax Rate Optimization

115BAA election analysis. MAT credit utilization planning. Book profit optimization. Dividend distribution tax strategy.

Optimizes: Effective tax rate

M&A Tax Structuring

Share vs. asset deal analysis. Tax-neutral reorganizations. Loss preservation (Section 79). Stamp duty optimization.

Enables: Tax-efficient transactions

Advance Ruling & AAR

Application strategy for material positions. Pre-transaction certainty. Litigation risk mitigation.

Provides: Certainty on positions

Assessment & Litigation

Scrutiny assessment representation. CIT(A) appeals. ITAT representation. High Court matters.

42 years of professional experience
Case Study

MNC Subsidiary: Transfer Pricing Defense & Restructuring

Client Profile

  • • Indian subsidiary of US technology MNC
  • • Annual revenue: ₹400 Cr
  • • 15% management fee to parent company
  • • R&D cost-sharing arrangement
  • • Received TP adjustment notice: ₹85 Cr

Issues Identified

  • Management fee lacked service-by-service benchmarking
  • R&D cost-sharing documentation inadequate for BEPS
  • No Master File or CbCR filed (₹50L+ penalty risk)
  • Treaty benefits claimed without Form 10F

Our Defense & Restructuring

1. TP Litigation Defense

Built detailed FAR analysis. Comparative benchmarking. Reduced adjustment from ₹85 Cr to ₹8 Cr.

2. Documentation Overhaul

Prepared Master File, Local File, CbCR. BEPS-compliant documentation system.

3. Treaty Compliance

Filed Form 10F for all treaty transactions. Recovered withheld taxes via treaty claims.

4. Go-Forward APA

Filed APA application for management fee pricing. Certainty for 5 years.

₹77 Cr
TP Adjustment Reduced
₹23 Cr
Tax Saved (incl. penalty avoided)
5 Yrs
APA Certainty Obtained
100%
Penalty Avoided

"The ₹85 Cr adjustment notice was terrifying. Our previous advisors had no answer. Sami's team built a defense that reduced it to ₹8 Cr—and more importantly, set up systems so this never happens again. The APA gives us certainty for five years of planning."

— CFO, US Technology Company Indian Subsidiary

Questions & Answers

Common Questions from Corporate Tax Teams

Expert answers on Transfer Pricing, POEM, DTAA, and M&A transactions

Several red flags trigger TP audits:

  • International Transactions exceeding ₹1 Cr in aggregate
  • Consistent losses in Indian entity while foreign parent is profitable
  • Royalty/technical service fee exceeding industry benchmarks
  • Large inter-company loans at non-market rates
Penalty Risk: TPO can add 100-300% penalty if arm's length price differs materially.

Sami Tax approach: We build TP documentation as if audit is certain—because for corporate groups, it usually is.

Safe Harbor Rules (Section 92CB) provide pre-determined margins accepted without further scrutiny:

IT/ITeS

17-22% operating margin

KPO

18-25% margins

Auto Components

Varies by product

Trade-off: Deemed margins may be higher than market analysis would support, so you may pay slightly more tax.

Sami Tax analyzes whether Safe Harbor or full TP documentation gives better outcome for your specific transactions.

POEM determines tax residency for companies. A foreign company is treated as Indian resident (taxed on global income) if its POEM is in India.

Risk Scenario:

Singapore holding company but all directors meet in India, decisions are made in India, Indian executives run the show = deemed Indian resident.

Implications:

  • • Global income taxable in India
  • • Indian transfer pricing on all transactions
  • • MAT applicability

Sami Tax helps: Structure board meetings, document decision-making locations, and ensure POEM is genuinely outside India.

Double Taxation Avoidance Agreements (DTAA) with 90+ countries provide relief:

  • 1.Reduced Withholding: Instead of 20% on technical services, Singapore treaty may allow 10%
  • 2.PE Protection: Proper structuring avoids PE formation and Indian taxation
  • 3.Capital Gains: Some treaties allowed exemptions (grandfathered provisions)
Critical: You MUST file Form 10F to claim treaty benefits. Missing this = full domestic tax rate.

Sami Tax reviews your cross-border flows and optimizes treaty usage while ensuring GAAR compliance.

Section 115BAA offers 22% rate (25.17% effective) but requires forgoing most deductions:

✗ You LOSE

  • • 80IA/IB (infra/industrial)
  • • Section 35 weighted R&D
  • • Section 10AA (SEZ)
  • • Section 35AD investment allowance

✓ You KEEP

  • • Normal depreciation
  • • Lower headline rate
  • • Simpler compliance

Sami Tax models both scenarios annually—the answer can change as business mix evolves.

M&A tax issues are complex:

1.Share vs Asset: Shares = LTCG 12.5%. Assets = income + stamp duty.
2.Section 79: >49% shareholding change = loss carryforward blocked
3.MAT Credit: Survives in amalgamation but not in demerger (generally)
4.Goodwill: No longer depreciable post-2021 amendment

Sami Tax provides: Pre-transaction tax structuring and post-transaction compliance support for M&A deals.

Elevate Your Corporate Tax Function

Schedule a consultation with our corporate tax team. We'll review your TP exposure, international structure, and identify optimization opportunities.