• Latest
  • Trending

Tax On Offshore Share Transfers May Hit Cross-Border M&A Deals

March 19, 2012

BJP Led By Narendra Modi Battles Hard In State Polls

April 3, 2021

India’s ‘World’s Pharmacy’ Tag Is Facing A Threat

April 3, 2021
ADVERTISEMENT

A Slew Of Setbacks For The Congress Leader Chennithala On Poll-Eve

April 3, 2021

India Must Avoid Any Panic Reaction Amidst The Second Covid-19 Wave

April 3, 2021

Connectivity Has Emerged As A Focus Area Of India And Bangladesh

April 3, 2021

BJP Led NDA Facing Toughest Test In Third Phase Of Assam Polls On April 6

April 3, 2021

Modi-Shah’s Double Standards On CAA May Affect BJP In Assam

April 3, 2021

Bhupesh Baghel Emerges As Prominent Organiser Within Congress

April 3, 2021

Mamata’s Opposition Unity Call Has Big Relevance For 2024 Lok Sabha Polls

April 1, 2021

Amit Shah Is Dream Merchant For Sonar Bangla Without Knowing Its Origin

April 1, 2021

After Freedom House, V-Dem, The Turn Of The US State Department

April 1, 2021

How Long This Jobless Economic Planning Will Continue In India?

April 1, 2021
ADVERTISEMENT
  • Setup menu at Appearance » Menus and assign menu to Top Bar Navigation
Saturday, April 3, 2021
No Result
View All Result
IPA Newspack
  • Setup menu at Appearance » Menus and assign menu to Main Navigation
  • Setup menu at Appearance » Menus and assign menu to Main Navigation
No Result
View All Result
IPA Newspack
No Result
View All Result
ADVERTISEMENT

Tax On Offshore Share Transfers May Hit Cross-Border M&A Deals

IPA Staff by IPA Staff
March 19, 2012
in Uncategorized
2 min read
0
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT

MUMBAI: India Inc, which saw a declining number of mergers & acquisitions (M&As) in 2011, is set to face another blow in the form of a new tax proposal from the finance ministry in the Union Budget.
The government has proposed to retrospectively tax offshore share transfers of foreign companies, the value of which is substantially derived from assets located in India, with effect from 1962.
Finance Minister Pranab Mukherjee’s move to tax offshore share transfers will significantly increase tax costs for buyers and make planning of cross-border M&As and group restructurings difficult, industry says.
Nitin Potdar, partner (M&A), J Sagar Associates, said: “The proposed amendment was extremely regressive and self-defeating. The amendment will certainly jeopardise the conducive environment created by the string of the government’s pro-investment policies. It would also impact cross border transactions negatively, and hence,India’s foreign investment prospects.”
Apart from making transactions such as the $11.1-billion Vodafone-Hutchinson deal in 2007 liable to tax, this amendment would have serious ramifications on deals such as Aditya Birla Nuvo’s $150-million buyout of 16 per cent stake in Idea Cellular India from AT&T Mauritius, SAB Miller’s acquisition of Foster and Vedanta’s deal to buy a 51 per cent stake in Sesa Goa from Mitsui. Similarly, Tata Industries’ acquisition of 17 per cent stake in Idea Cellular India from AT&T is also likely to be in trouble. Sanjay Sakhuja, CEO, Ambit Corporate Finance, said, “Investors, both foreign and Indian, took investment decisions based on long-term stability in tax and regulatory regimes. That the effective taxes applicable to a particular situation were increasing was not per se an issue. Rather, it was the retrospective nature of the proposed amendment that I found disturbing. This would certainly have a negative impact on FDI.”
The country witnessed 644 M&A deals worth $45 billion in 2011, against 662 deals worth $50 billion in 2010, according to report from Grant Thornton.
The budget has also proposed to introduce comprehensive general anti-avoidance rules (GAAR), effective from April 1, 2013. These new norms, which will override the provisions of tax treaties signed by India, will capture most conventional structures for M&As and investments into the country.
“If implemented, GAAR would open up a Pandora’s box of uncertainty and litigation, and investors might be forced to think twice before considering opportunities in India,” said Nishith Desai, founder of law firm Nishith Desai Associates. “Several genuine legitimate tax planning arrangements and investments through popular jurisdictions such as Mauritius, Singapore and Cyprus might be hit by GAAR,” he added.
GAAR provisions give wide discretionary powers to revenue authorities in taxing transactions on grounds of tax avoidance. “GAAR is indeed going to haunt us in times to come. What do the provisions mean to the India-Mauritius tax treaty? The safeguard of dispute resolution panel is not at all sufficient. These provisions are likely to result in huge tax litigation,” said Dinesh Kanabar, deputy CEO & chairman, Tax, KPMG India.
Echoing similar views, Vipul Jhaveri, partner-M&A, Deloitte India said, “Introduction of GAAR, albeit with checks to prevent its abuse would add to uncertainty on tax positions regarding prevailing arrangements and structures. In cross-border M&A one would have to watch out for the tool box of counter measures for tax avoidance in respect of transactions with persons located in notified jurisdictions that do not effectively exchange information with India.”

RelatedArticles

BJP Led By Narendra Modi Battles Hard In State Polls

India’s ‘World’s Pharmacy’ Tag Is Facing A Threat

A Slew Of Setbacks For The Congress Leader Chennithala On Poll-Eve

ADVERTISEMENT
Previous Post

Pandora's Box Opens With Domestic Transfer Pricing

Next Post

Power Companies Seek More Policy Initiatives

IPA Staff

IPA Staff

Related Posts

IPA Service

BJP Led By Narendra Modi Battles Hard In State Polls

by ipaadmin
April 3, 2021
IPA Service

India’s ‘World’s Pharmacy’ Tag Is Facing A Threat

by ipaadmin
April 3, 2021
IPA Service

A Slew Of Setbacks For The Congress Leader Chennithala On Poll-Eve

by ipaadmin
April 3, 2021
IPA Service

India Must Avoid Any Panic Reaction Amidst The Second Covid-19 Wave

by ipaadmin
April 3, 2021
IPA Service

Connectivity Has Emerged As A Focus Area Of India And Bangladesh

by ipaadmin
April 3, 2021
IPA Service

BJP Led NDA Facing Toughest Test In Third Phase Of Assam Polls On April 6

by ipaadmin
April 3, 2021
Load More
Next Post

Power Companies Seek More Policy Initiatives

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

I agree to the Terms & Conditions and Privacy Policy.

Advertisement

ADVERTISEMENT

Recommended

Prime Minister Modi’s London Visit, Bharat Ki Baat, Other Highlights

3 years ago
Karnataka Imbroglio Exposes The Limits Of Anti-Defection Law

Supreme Court: Swing Between Activism And Populism

2 months ago
Load More
ADVERTISEMENT

Contact

India Press Agency D-34, Basement, Gulmohar Park, Delhi - 110049 Gautam Nagar, New Delhi
ADVERTISEMENT
ADVERTISEMENT

About Us

IPA Newspack

IPA Intelligence Unit is a specialist service of India Press Agency (IPA), one of the oldest news agencies of India.

  • Setup menu at Appearance » Menus and assign menu to Footer Navigation

© 2020 India Press Agency - Latest Breaking news and Opinion IPA Media Group | Arabian Post

No Result
View All Result

© 2020 India Press Agency - Latest Breaking news and Opinion IPA Media Group | Arabian Post

Login to your account below

Forgotten Password?

Fill the forms bellow to register

*By registering into our website, you agree to the Terms & Conditions and Privacy Policy.
All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In