Taxation
New
General Anti-Avoidance Rules (GAAR) were issued. The new rules, which come into
effect on 1st February, 2015, apply only to cross-border
arrangements. It is specified that:
1. GAAR
should only be used once SAAR (Specific Anti-Avoidance Rules) and tax treaty
provisions are exhausted. SAT approval
is required.
2. GAAR
will be invoked where either the sole or main purpose of an arrangement is to
obtain a tax benefit or the tax benefit is obtained by using an arrangement
whose form is permitted under tax rules, but is not consistent with the
economic substance of the arrangement.
3. Once
GAAR are invoked, tax authorities may adjust the result of the arrangement such
that it is in conformity with the deemed reality of the underlying commercial
situation.
4. The
onus of proof under a GAAR investigation rests with the party being
investigated.
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