Question

12. A new regulation having digital companies that have a significant presence, even though they may not have a physical presence, in the country will now have to pay all relevant local taxes. The regulations took effect in November 2019. What foreign country market is imposing this tax?

Answer 1

In case of significant economic presence

the country levying the tax is the one in which revenue is being generated.

For eg:- As Facebook is earning revenue in India by providing advertisement services. The person making payment to Facebook has to deduct 6% equalisation levy to amount payable and has to deposit it with the tax authorities.

Same way the country in which foreign company has significant economic presence levies the tax. Moreover , the word "significant presence" or as to what constitutes significant presence is Itself described in Double taxation avoidance agreement between the two countries, commonly known as DTAA