The Covid-19 pandemic has exposed catastrophic outcomes upon the entire world and India is no exception. The limited experience of handling such a crisis in India has already revealed its overbearing effect on business and industry, while the tax landscape has also faced significant transformation as a consequence. In an interconnected world, some of the issues that have arisen in the context of cross-border taxation have created concern for businesses and taxpayers, with the potential of leading to far-reaching implications. Some of these issues are considered in further detail in this article.
Determining the residential status of an individual
The pandemic has forced the governments of many jurisdictions to impose partial or complete lockdowns, coupled with travel restrictions, in an attempt to decelerate the spread of the virus. These measures have rendered movement across country borders difficult, forcing residents and nationals of different countries to be stationed in other geographies. Furthermore, there are also tax residents of other jurisdictions, who have visited their home countries to take care of their families and have had to extend their stay there due to reasons beyond their control. These extended periods of stay can result in persons becoming resident in: (a) multiple tax jurisdictions; (b) a jurisdiction where they would not have been a resident otherwise, but for the travel constraints imposed as a result of the pandemic. Addressing the concerns faced by taxpayers, the Central Board of Direct Taxes (CBDT) clarified for the financial year (FY) 2019-20, that where individuals had come on a visit to India before March 22 2020, or were quarantined on or after March 1 2020, the period from March 22 2020 or onset of quarantine till March 31 2020 or the date of departure (whichever is earlier) shall be excluded in determining residential status. It was also clarified that for individuals who have been quarantined on or after March 1 2020, the period of stay from the onset of quarantine till March 31 2020 or date of departure whichever is earlier shall be excluded.
Addressing the concerns raised by stakeholders for FY 2020-21, the CBDT issued another clarification wherein…
