India’s tax office has begun denying tax benefits to Irish aircraft lessors, that were previously accessible under the treaty with Ireland and industry sources claim is in breach of the treaty..
The Indian Revenue Service is leveraging the Base Erosion and Profit Shifting (BEPS) Multilateral Instrument, which India and Ireland are parties to, to tackle what it claims is tax avoidance by three Irish lessors that it does not name.
The treaty allows these lessors tax free income on income from Indian aircraft leases, and Indian airlines do not withhold taxes on payments made to them; the issue pertains to lease rentals from the 2020/21 period and is currently before a tax dispute resolution panel.
The matter relates to 2020/21 lease rentals and is now reportedly before a tax office-run dispute resolution panel.
In response to this crackdown, the Indian government is promoting the establishment of aircraft leasing operations in India, particularly in Gujarat’s IFSC GIFT City, which offers incentives such as a ten-year tax waiver on lease income.
Ireland and India signed the Multi-lateral Instrument on 7 June 2017 in Paris to implement tax treaty-related measures.
