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TAX TREATMENT OF THE SPECIAL PURPOSE VEHICLE

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TAX TREATMENT OF THE SPECIAL PURPOSE VEHICLE
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Abhijeet S
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TAX TREATMENT OF THE SPECIAL PURPOSE VEHICLE - October 1st, 2010

TAX TREATMENT OF THE SPECIAL PURPOSE VEHICLE:

Taxation of the SPV is one of the most crucial tax issues in a securitization transaction. The ultimate cost of a securitization transaction would be increased if the SPV taxation leads to a double taxation of originator income.

Therefore following are the three alternative ways of taxing the SPV


1. Pass-through or tax spread entity:


The SPV is not treated as taxable entity; investors are taxed in individual capacity on their share of income


2. Representative taxation:

SPV is taxed as representing investors. SPV pays tax usually at a maximum marginal rate; investors do not pay tax on their share in the income.


3. Entity level tax:

SPV pays tax on its income net of investor servicing. Investors pay tax on income received by them. Originator’s share is taxed twice.


Out of the above three alternatives, the alternative one is more suitable as under this, SPV will be regarded as a tax neutral entity.
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Re: TAX TREATMENT OF THE SPECIAL PURPOSE VEHICLE - July 11th, 2015

"Tax treatment of Atal pension is not clearly known but we understand it will be at par with the existing National Pension Scheme (NPS)," PFRDA whole-time member B S Bhandari told PTI.

NPS is an EET (exempt exempt tax) product. PFRDA had been batting for EEE status for NPS.

Under the current rules, the NPS corpus is taxable at the time of withdrawal.

"Tax treatment is an issue that has affected NPS. The taxation is associated with the scheme as it is taxed at maturity. All other competing products, including EPF, Public Provident Fund, are EEE while NPS is EET (exempt txempt taxed)," Mr Bandari said.
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