Apr 28, 2012, 11.42 AM | Source: CNBC-TV18

FIIs ready to pay reasonable tax than uncertainty: KPMG

Dinesh Kanabar, deputy chief executive and chairman, tax, KPMG, tells CNBC-TV18 that the finance ministry’s proposal will ensure a degree of certainty

In an interview to CNBC-TV18, Dinesh Kanabar, deputy CEO and chairman, tax, KPMG says that the finance ministry’s proposal will ensure a degree of certainty. Most FIIs come from treaty-protected countries and not all FIIs have short-term capital gains as they are long-term investors, he explains.

Below is an edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.

Q: Does it seem plausible to give FIIs the benefit of business income and a lower tax rate on the business income as opposed to short-term capital gains tax? How will the FII community react?

A: If you are looking at business income and assuming that the income which is earned by FIIs as business income versus capital gains, remember that under the Direct Taxes Code there was a proposal to say that the income to FIIs will only be capital gains and not business income.

 But assuming that the new proposals were to state that it is business income, the government has to provide a degree of certainty because nobody wants to face the vagaries of General Anti-Avoidance Rules being applied and having business income classified at a higher rate.

But a very important question which will arise if one comes form a country where the tax treaty is protected and one does not have a permanent establishment in India.

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