Visit the global automotive industry news blog with Asia automotive industry news and India automotive industry news.
Avneet Jolly and Anupam Prakash
ASIA: "Enabling Growth in Promising Indian Companies: The Positive Power of Private Equity" report. 44-page report by KPMG India.
proceed to download
backASIAtalk June, 2012
India: Retrospective taxation likely to spare most foreign M&A deals
The controversial provision to retrospectively tax indirect transfer of Indian assets through deals executed overseas is likely to spare a large number of transactions by excluding those where the Indian assets account for less than half the total deal size.
The retrospective amendment to the Income-Tax Act, part of this year's budget and which most tax experts say is targeted at Vodafone Plc, says overseas acquisitions and mergers that involve 'substantial' Indian assets will be taxed here.
It does not define 'substantial'. "It (substantial) could be defined as more than 50%," a finance ministry official told ET.
The finance ministry has begun internal discussions on administrative guidelines to be issued in the form of a circular to provide clarity on how such transactions will be dealt with by the tax authorities.
The clarification is intended to reassure edgy foreign investors, including foreign institutional investors and private equity investors, and also help improve the overall investment climate.
Such a definition of 'substantial' stake change would be in line with the one provided in the Direct Taxes Code that is likely to be implemented from the next fiscal.
Experts say the clarification will give much-needed relief to foreign investors as it will help exclude transfer of Indian assets in a global scheme of merger and acquisition, where these assets account for only a small proportion of the deal.
"If the 'substantial value' test is rightly defined at more than 50% Indian value attribution to the global transaction, it would give great comfort to global investors that the tax laws in India are not unreasonable," says Pranay Bhatia, associate partner, Economic Law Practice.
Says Rahul Garg, National Direct Tax Leader, PwC: "This would bring clarity and also exclude cases where substantial assets are not in India. But it would still need to be clarified that internal restructuring does not get hit even if value of asset derived from India is more than 50%."
Once internal discussions are over, a detailed circular will be issued by the Central Board of Direct Taxes, the apex body in charge of direct taxes.
Government officials say the circular will provide certainty to foreign investors on the kind of transactions that could become taxable.
The rule will apply to deals in which income tax assessment is not complete. The law does not apply to cases where assessment has been concluded.
A dozen such deals could fetch the government as much as 40,000 crore - more than half of it from Vodafone alone, finance ministry officials say.
Vodafone, which is being pursued by Indian authorities for not withholding tax on a 2007 deal in which it bought the local telecom business of Hutchison, is likely to challenge the validity of the tax demand before an international arbitration tribunal.
Foreign investors have been wary of investing here after the budget introduced the General Anti-Avoidance Rules, or GAAR, and changed the income-tax law retrospectively. Responding to the widespread concern, the government deferred GAAR by a year after FIIs pulled out nearly $1 billion from India in April.
Source: Economic Times - GAI
China’s Mid-Market Innovators
read on
India: Auto companies turn to localisation
read on
China Automotive Monthly: Executive Summary - May, 2012
read on
India Automotive Monthly: Executive Summary - April, 2012
read on
Asean Automotive Monthly: Executive Summary - April, 2012
read on
Lending curbs stall Indonesian car boom
read on
China-EV.org Blog: Another PHEV powertrain company looks to U.S. for funding and China for customers
read on
Asia Pacific Economic Outlook — May 2012
read on
Asian manufacturing weak on global worries
read on
Tough times for China's exports warned
read on
S. Korean manufacturers' biz sentiment falls for June
read on
Thailand: Corruption, red tape holding back growth
read on
China: Future foreign investment 'unpredictable'
read on
India: Board set under Anand Sharma to boost manufacturing sector
read on
India Manufacturing: Brief Introduction
read on
Common supply links 'vital to Asean trade'
read on
India: Retrospective taxation likely to spare most foreign M&A deals
read on
China – New Government Policy Goal: More Collective Bargaining in the Private Sector
read on
Robots lift China's factories to new heights
read on
Dispute Resolution in Asia - Fourth Edition (Guide)
read on
India: Foreign corporates having Liaison Office to file annual statement - New rules of the game
read on
Chinese firms keep seeking overseas M&As
read on
Non-linear models - Driving the next phase of growth for the Indian IT Industry
read on
Video: India vs China: Which Asian Giant Is A Better Long-term PE Bet
read on
Foreign investors flocking to Japan's crowded capital
read on
Flexible Benefits: An Effective Prescription in China
read on
Results of JETRO’s Survey on Business Conditions of Japan’s Small and Medium-sized Parts Suppliers and Their Status and Challenges for Asian Expansion
read on
Domestic demand and global investment drive business in Indonesia
read on
Housing prices in China cities down in May
read on
Asian Airlines Hit by Weak Demand and Softening Rates
read on
Singapore: one of the top targets for acquisitions by companies in emerging economies
read on
KPMG's Taxation Guide on Singapore (2012)
read on
Korea needs pro-expat law
read on
Singapore, Asia’s Most Livable City
read on
Singapore opens first-of-its-kind remanufacturing R&D facility
read on
Asia update: global headlines
read on
subscribe to eJournals
View our blogs:
The Asian Automotive Industry Market
The Brazil Automotive Industry Market
The Chinese Automotive Market
The European Automotive Market
The Global Automotive Market (HR edition)
The Indian Automotive Market
The Mexican and Latin Automotive Market
The U.S. Automotive Market
To visit GlobalAutoExperts Directory, click here.