Income Tax Act 2058

Chapter 13 International Tax

Section 69 : Controlled foreign entities
1) If any entity distributes dividends of the associated income earned in any income year as a controlled foreign entity at the end of the income year, it shall be deemed to have distributed dividends in proportion to its beneficiaries, as follows:-
a) As per the rights of the beneficiaries to the income in distributing dividends or
b) If the rights are not certain in a reasonable manner, as per the method which the Department thinks appropriate according to the circumstance.
2) Tax shall not be levied on the dividends distributed by an entity as a controlled foreign entity at the end of any income year except those distributed pursuant to sub-section (1).
3) The following shall be deemed to have occurred in respect of the dividends distributed by a controlled foreign entity pursuant to sub-section (1) to the beneficiaries associated with that entity at the time of distribution of dividends:-
a) Having the characteristic equivalent to the type and source of the associate income of that entity and
b) Having distributed proportionately out of each type and source the associate income of that entity.
4) Any tax paid by any controlled foreign entity, including that deemed to be paid pursuant to Sub-section (5) or Sub-section (5) of Section 52 in respect of the amounts deemed to be distributed pursuant to sub-section (3), has to be set aside for the beneficiary associated with that entity.
5) The tax set aside pursuant to sub-section (4) at the time of allocation shall be deemed to have been paid by the beneficiary, and the beneficiary may get a facility of tax adjustment for such tax, as provided for in Section 71.
6) The amount to be deemed as distributed to the beneficiary pursuant to sub-section (1) at the time of distribution has to be included in the expenses for any property or liability of the recipient beneficiary in the entity making such distribution.
7) The dividends distributed to the beneficiary enjoying tax exemption pursuant to sub-section (2) at the time of distribution have to be included in the income for any property or liability of the recipient beneficiary as an interest in the entity making such distribution.
8) For purposes of this Act, the foreign income tax paid or foreign income tax deemed as paid by any controlled foreign entity pursuant to sub-section (5) or sub-section (5) of Section 52 shall be deemed as tax amount paid by that entity or deemed to be paid by that entity pursuant to this Act.
Explanation:
For purposes of this Section,-
(a) “Associated income” means, in computing taxable income of any controlled foreign entity in any income year, a taxable income computed as if that entity were a resident entity.
(b) “Controlled foreign entity” means any non-resident entity in which any resident person has interest directly or indirectly through one or more interposed non-resident entities in any income year; and where that person is associated with that entity or where any person deemed to be associated with and any other resident persons not exceeding four persons are associated with that entity, it includes such entity, as well.