Place of Effective Management

Place of Effective Management (POEM)

POEM or place of effective management is defined as the place where the “key management and commercial decisions that are necessary for the conduct of business of an entity as a whole are, in substance made.”
Article 4 of the MLI or the Multilateral Instrument recommends use of MAP or The Mutual Agreement Procedure to resolve any dual residency claims on a case-by-case basis. India has adopted Article 4.
With the change in tax treaties and the world order converging to secure their own tax base. POEM has been implemented in India. The new MLI signed amongst the member countries who have acceded to the protocol POEM provides a standard set of rules.
We can help mitigate such risks by a study of the activities conducted by a company or its group companies. Place of effective management rules and guidance notes and circulars have been released to study the impact of such an implementation.