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 Place of Effective Management (POEM) is a concept used in international tax law to determine the residency of a company for tax purposes. It is used to identify which country a company is considered to be a tax resident in, especially in cases where the company is registered in one country but conducts its central management and control in another.

In Simple Terms:

POEM refers to the location where the key decisions about the company’s business are made. This includes decisions on business policies, strategies, and the general direction of the company. If these key decisions are made in one country, that country may be considered the place of effective management, regardless of where the company is legally incorporated.

Example:

Imagine an Indian company, XYZ Pvt Ltd, which is incorporated in Singapore. However, all the major decisions, such as business plans, financial strategies, and major investments, are made by the directors and top management sitting in India. In this case, India would be considered the "Place of Effective Management" (POEM) because that is where the key management and control of the company take place, even though the company is legally incorporated in Singapore.

The significance of POEM is crucial for tax purposes. A company is generally considered a resident of the country where its POEM is located, and this determines which country has the right to tax its global income. This helps prevent companies from using low-tax jurisdictions for tax avoidance purposes, by ensuring they are taxed in the country where they actually conduct their management activities.

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