Tax Residency Certificate cannot be questioned by Authorities

A Tax Residency Certificate (TRC) issued by authorities of a foreign nation cannot be questioned by tax authorities. This was mentioned in a recent judgement issued by the Delhi bench of the Income Tax Appellate Tribunal (ITAT) in the matter of the Singapore corporation Reverse Age Health Care Services. The judgement is in accordance with the Delhi High Court’s ruling in the Blackstone Capital case. These decisions are seen as a major victory for international investment.

A TRC serves as documentation of a nation’s tax residency for purposes of benefitting from the provisions of the applicable tax treaty. The admissibility of advantages, such as a zero or lower tax rate offered under the tax treaty, is frequently contested by tax authorities. Anish Thacker, a chartered accountant, stated that the recent rulings by the court and ITAT “would put to rest any apprehensions among international investors who are tax residents in tax-favourable countries and will help guide I-T officials.”

In this instance, Reverse Age Health Services sold its ownership in Dr Fresh Health Care to VIC Enterprises, another Indian company. Dr Fresh Health Care is a private corporation in India. Tax Deducted at Source (TDS) was deducted from the capital gains that accrued to the Singapore-based seller by the Indian business that bought the stock. Reverse Age Health Services, on the other hand, asserted that short-term capital gains were not taxable in its hands under the India-Singapore tax treaty and requested a refund of this TDS of Rs. 1.09 crore during the financial year 2017–18.

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