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1. Method of Separate Accounting

79. In general, the fiscal authorities start from the principle that the profit made by the N.E.I. part of the enterprise must be proved by the book-keeping carried on in this country. The annual statements sent in with returns, and containing the data for the so-called East Indian profits, will serve as a basis of assessment. This procedure is just; bona-fide taxpayers, who have arranged their book-keeping in such a way that it gives a clear insight into the profit made by the “branch”, need not have their entire book-keeping examined. Of course, the taxpayer may at all times be asked to give any information with regard to the book-keeping of the branch, its relation to the chief book-keeping and to that of other branches, the manner of invoicing, the calculation of compensation for services rendered by the other branches to the Indian branch. This procedure has also practical advantages, because the Company-Tax Ordinance imposes on the taxpayer an obligation the ignoring of which will place him in the position of a defaulter. The administration may then estimate the taxable income.

80. A considerable number of the enterprises working in N.E.I. are resident in the Netherlands. A few years ago a branch of the N.E.I. tax-accountancy service was instituted in the Netherlands; this enables the administration to examine the chief book-keeping of those bodies established in the Netherlands, with their consent. Up to the present, no objections have been raised by the taxpayers against this examination. It goes without saying that there is a perfect co-operation between the two services, the one in N.E.I., the other in the mother country. In a few instances, the N.E.I. authorities have examined the principal book-keeping of businesses established in other countries with the consent, of course, of the taxpayer.

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