cbdt issues a circular on indirect transfer provisions clarifying applicability to offshore funds
TRANSCRIPT
Vol. 13 Issue 1.1 January 9, 2017
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CBDT issues a circular on indirect transfer provisions clarifying
applicability to offshore funds
The Central Board of Direct Taxes (‘CBDT’): India’s apex tax administration body has
issued a Circular No 41 of 2016 (the ‘New Circular’) on December 21, 2016 clarifying
various aspects of the indirect transfer provisions that are codified in the Indian
income-tax law1. The CBDT had set-up a Working Group on June 15, 2016 to study
the scope and the concerns raised by various stakeholders in relation to the indirect
transfer provisions; the clarifications provided in the New Circular are based on the
comments of the Working Group. The New Circular is in the form of FAQs and
contains 19 clarifications on applicability of the indirect transfer provisions to (i)
various investment funds that conduct portfolio investments in India through different
fund structures, and (ii) on other salient aspects of the indirect transfer provisions.
At the outset, it is important to note that the New Circular does not state anything new
in relation to the manner in which the indirect transfer provisions, as are currently
codified in the income-tax law, ought to be interpreted. It merely reiterates the law
and unfortunately, does not provide any relief to offshore funds.
Background
The indirect transfer provisions were introduced in the Indian income-tax law in 2012,
with retrospective effect from April 1, 1961. As per the indirect transfer provisions,
any share or interest in an offshore entity that substantially derives its value from
underlying Indian assets, is deemed to be situated in India; consequently, a transfer
of such a share / interest in the offshore entity should be subject to tax in India. The
indirect transfer provisions were introduced with the intent to repudiate the ruling of
the Supreme Court of India in the case of Vodafone2, where the Supreme Court had
held that Vodafone was not liable to withhold taxes on the purchase of shares in an
offshore company from a non-resident seller, resulting in Vodafone acquiring indirect
ownership in the seller’s Indian telecom business, which was held by the seller
through a network of foreign entities. The indirect transfer provisions were intended
to apply to transactions that are routed through low tax or no tax countries, with which
India does not have a tax treaty3.
Since 2012, the indirect transfer provisions have been subject matter of considerable
debate and have created much angst amongst offshore investors, such as Public
Market funds and private equity funds that manage India-focused funds and / or
deploy an India-focused investment structure, by setting-up an India-focused SPV to
invest into India. The concerns were manifold, ranging from (i) extra-territorial
applicability of the Indian income-tax law, (ii) double taxation of income where the
offshore fund has paid tax on its India-sourced income, (iii) applicability of Vodafone
tax principles to non-Vodafone like structures, as in these cases there was an actual
direct transfer of shares / securities of Indian companies etc. Over the past few
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years, the Indian Government, at its end, has tried to allay the concerns of foreign
investors, as regards various issues with the indirect transfer provisions by:
(a) Extending the reference made to the committee that was set-up by the Indian
Government and which was headed by Dr Parthasarthi Shome (‘Shome
Committee’) to examine the GAAR provisions, to also examine the issues
associated with the indirect transfer provisions4;
(b) Constituting a high-level committee to consider assessment of income (arising
prior to April 1, 2012) arising from the retrospective applicability of the indirect
transfer provisions;
(c) Amending the indirect transfer provisions in the Union Budget 2015 to provide
various safeguards against the trigger of the indirect transfer provisions, such as,
carve-outs for small investors, providing that the indirect transfer provisions will
apply only to those offshore entities that derived at least 50% of their value from
Indian assets, and providing for taxation of income on account of indirect
transfers only on a proportionate basis;
(d) Clarifying that dividends declared and paid by an offshore company outside India
in respect of shares that derive substantially their value from India assets, do not
come within the purview of the indirect transfer provisions; and
(e) Introducing valuation rules for determining the value of shares / interest in the
offshore entity under the indirect transfer provisions.
Unfortunately, the aforesaid measures taken by the Government have not really
addressed the concerns raised by foreign investment funds, as regards the
applicability of the indirect transfer provisions to their cases. The New Circular issued
by the CBDT does not provide any relief to foreign investment funds, and does not
address their concerns with the indirect transfer provisions.
Summary of the New Circular and our comments
Question Nos 1 and 10: Single-tier India-focused investment structure
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Bobby Parikh, Mumbai
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Amit Jain, Pune +91 20 668 19010 [email protected]
Russell Gaitonde
Sudeep Sirkar
Hemant Vaishnav
Facts
Fund is set up in a popular jurisdiction, say US and is registered in India as a
Foreign Portfolio Investor (‘FPI’).
It pools money from retail / institutional investors and invests in shares of listed
Indian companies.
More than 50% of total assets of the Fund are in India.
Value of assets of the Fund are greater than Rs 100 million (~US$ 1.47
million).
The Fund buys and sells shares on the Indian bourses and pays tax as per the
income-tax law or applicable tax treaty rates.
The Fund redeems the units / shares held by investors on an ongoing basis.
Questions framed to the Indian Government
Q1 - Will the indirect transfer provisions apply to redemption of shares / units
by the Fund?
Q10 - FPIs are not strategic investors and pay taxes in India on capital gains
earned by them. Applying the indirect transfer provisions in the case of FPIs
could lead to double taxation of the same income ie tax on gains earned on
direct transfer of Indian securities and tax on gains earned by investors of the
FPIs on redemption of shares / units in the FPI. Hence, exemption from the
indirect transfer provisions should be provided for FPIs.
CBDT clarification
The indirect transfer provisions will be applicable to the investors of the Fund
on the redemption of shares / units of the Fund.
However, the carve-out prescribed in the income-tax law for ‘small investors’
will be available ie investors:
(i) Holding 5% or less voting power or share capital or interest in the Fund;
and
(i) Not holding any right of management or control in the Fund
will not be subject to the indirect transfer provisions.
Kalpesh Maroo, Bengaluru
+91 80 4032 0090
Question No 2: Multi-layered India-focused investment structure
Critical evaluation:
The CBDT has merely reiterated the provisions of the income-tax law in
its clarification. The CBDT has not addressed the issue of double-
taxation of income: (i) first, where the FPI pays tax in India on direct
transfer of shares in Indian companies, and (ii) second, where the
investors are liable to Indian taxes under the indirect transfer provisions
on redemption of units / shares by the FPI.
The CBDT seems to have ignored the recommendation of the Shome
Committee while providing the above clarification. In its draft report to
the Government, the Shome Committee had observed that the indirect
transfer provisions will result in taxation at every upper level of
investment in a FPI structure, leading to multiple taxation of the same
income which has been subjected to tax in India in the hands of the FPI.
It is therefore necessary to exclude all investors above a FPI from the tax
net in respect of an FPI’s investment in India. The Shome Committee had
recommended that the above should be clarified through an
administrative circular to provide that non-resident investors that have
invested, directly or indirectly, in a FPI will not be taxable in India under
the indirect transfer provisions.
Facts
Fund I and Fund II are feeder funds that have been set-up in different
countries, say Mauritius and Luxembourg, respectively.
They pool money from investors for onward investment into India through
Fund III, situated in Mauritius and registered in India as a FPI.
None of the investors of Fund I and Fund II have the right of control or
management in Fund III or hold voting power or share capital or interest,
directly or indirectly, exceeding 5% in Fund III; a declaration to this effect is
provided by Fund I and Fund II, to Fund III.
More than 50% of total assets of Fund III are in India.
Value of assets of Fund III are greater than Rs 100 million (~US$ 1.47 million).
Question framed to the Indian Government
Will the indirect transfer provisions apply to investors in master-feeder
structures, given that the investors do not have the right of control or
management in Fund III or hold voting power or share capital or interest,
directly or indirectly, exceeding 5% in Fund III?
CBDT clarification
Prima facie, the indirect transfer provisions will not be applicable on the
redemptions undertaken by Fund I and Fund II to the investors, because the
investors fall within the carve-out prescribed in the income-tax law for ‘small
investors’ ie investors:
(i) Do not hold more than 5% voting power or share capital or interest in Fund III;
and
Do not hold any right of control or management in Fund III.
Question No 3: Omnibus investment structures
Critical evaluation:
Once again, the CBDT has merely reiterated the provisions of the
income-tax law in its clarification.
The CBDT has not specifically clarified whether the indirect transfer
provisions will apply in case of Fund I and Fund II, where Fund III
redeems its units / shares to pass on monies to Fund I and Fund II.
Perhaps, the CBDT has restricted its clarification to the question
raised before them, which does not seek clarity on applicability of
the indirect transfer provisions in the case of redemptions done by
the Master Fund to upstream monies to its Feeder Funds.
Given the manner in which the indirect transfer provisions have
been drafted and the CBDT clarification to Questions 1 and 10
discussed above, the indirect transfer provisions ought to apply to
redemptions undertaken by Fund III while flowing back monies to
its Feeder Funds, thereby resulting in a double taxation at this level.
Further, the Shome Committee recommendations to exclude all
investors above a FPI from the ambit of the indirect transfer
provisions (discussed above) seems to have been ignored by the
CBDT.
Facts
ABC is a foreign nominee / distributor that pools money from investors for
investment into the Fund.
None of the investors has the right of control or management in the Fund or
hold voting power or share capital or interest, directly or indirectly, exceeding
5% in the Fund; a declaration to this effect is furnished by the nominee /
distributor to the Fund.
ABC is recorded as registered shareholder in the books of the Fund.
More than 50% of total assets of the Fund are in India.
Value of assets of the Fund are greater than Rs 100 million (~US$ 1.47
million).
Question framed to the Indian Government
Will the indirect transfer provisions apply to nominee / distributor type
structures, where the investors do not have the right of control or
management in the Fund or hold voting power or share capital or interest,
directly or indirectly, exceeding 5% in the Fund?
CBDT clarification
Prima facie, the indirect transfer provisions will not be applicable on the transfer of
interest in ABC by investors, as the investors fall within the carve-out prescribed in
the income-tax law for ‘small investors’ ie investors:
(i) Do not hold more than 5% voting power or share capital or interest in the
Fund; and
Do not hold any right of management or control in the Fund.
Question No 4: India-focused sub-fund investment structure
Facts
The Fund is established in say US and pools money of its investors for
implementing investments in Asia.
The Fund directly invests 90% of its corpus in Asia (ie non-India). The
balance 10% of the corpus has been allocated towards Indian investments.
The Indian investments are implemented through a step-down entity based in
say Mauritius (ie Sub-fund); Sub-fund exclusively invests in Indian securities.
More than 50% of total assets of the Sub-fund are in India.
Value of assets of the Sub-fund are greater than Rs 100 million (~US$ 1.47
million).
Question framed to the Indian Government
Will the indirect transfer provisions apply to Fund which uses a separate
India-focused sub-fund for India investments, where none of the investors
have the right of control or management in the Fund or hold voting power or
share capital or interest, directly or indirectly, exceeding 5% in the Fund?
CBDT clarification
The indirect transfer provisions will apply in the case of the Fund, as the value of
shares held by it in the Sub-fund derives its value substantially from assets
located in India, irrespective of the shareholding of the ultimate investors.
Critical evaluation:
The CBDT has not clarified whether the indirect transfer provisions
will apply to ABC, when redemptions are implemented by the Fund.
Strictly tax technically, the indirect transfer provisions should
apply at the ABC level as ABC is not covered by the aforesaid
carve-out provisions. This will result in double taxation at the Fund
level, where the Fund redeems its shares held by ABC, to flow back
monies to ABC.
Question Nos 5 and 13: Listed offshore fund
Critical evaluation:
In the above example, the indirect transfer provisions have been
held to be applicable in the case of the Fund merely because it
has implemented its Indian investments through an India-
focused subsidiary; this may have not been the case had the
Indian investments been implemented directly by the Fund. The
CBDT clarification is in line with the manner in which the indirect
transfer provisions have been currently drafted. However, it will
result in a tax leakage at the Sub-fund level when the Sub-fund
redeems its shares and flows monies back to the Fund.
Facts
Fund is a listed fund in say Luxembourg and is registered in India as a FPI.
More than 50% of total assets of the Fund are in India.
Value of assets of the Fund are greater than Rs 100 million (~US$ 1.47
million).
The investors in the Fund keep changing on a daily basis, buying and selling
of the units / shares in the Fund through the stock exchange on which the
Fund is listed.
Questions framed to the Indian Government
Q5 – Will the indirect transfer provisions apply on transfer of shares or units
of an offshore listed entity?
Q13 - FPIs that are regulated and listed on a recognized stock exchange
should be excluded from the purview of the indirect transfer provisions.
CBDT clarification
The indirect transfer provisions will be applicable to the investors of the Fund
on the redemption of shares / units of the Fund. However, the carve-out for
small investors (discussed earlier) will be available.
A specific carve-out for FPIs that are regulated and listed on a recognized
stock exchange is not feasible.
Question No 6: Overseas merger of corporate entities
Critical evaluation:
Given the offshore listed entities are not specifically exempted
from the indirect transfer provisions, the CBDT has clarified the
above question in light of the extant indirect transfer provisions.
This is going to create practical challenges for investors in Fund,
as they will need to withhold Indian tax on payments that they will
make to the sellers in the Fund, even though they may not know
the identity of the sellers.
Pertinently, the Shome Committee had recommended that
exemption from the indirect transfer provisions may be provided
to a foreign company which is listed on a recognized stock
exchange and its shares are frequently traded therein. However,
once again, the Shome Committee’s recommendation has not
been considered in the New Circular.
Facts
Fund I and Fund II (both corporate entities) are set up in say Luxembourg.
Fund I is registered in India as a FPI. More than 50% of total assets of Fund I
are in India. Value of assets of Fund I are greater than Rs 100 million
(~US$ 1.47 million).
Fund I is merged into Fund II. The merger is tax neutral in
Luxembourg. Investors in Fund I will become investors in Fund II on account
of the merger.
Question framed to the Indian Government
Will the investors in Fund I be liable to tax in India under the indirect transfer
provisions, though the merger of Fund I into Fund II is not taxable in India
under a specific provision [section 47(viab)] in the Indian income-tax law?
CBDT clarification
Under the income-tax law, any transfer of a share in an offshore company on
account of a merger, that derives its value substantially from shares of an
Indian company is not taxable in India, subject to certain
conditions. However, the exemption does not extend to shareholders of the
merging foreign company. Hence, such shareholders will be liable to tax in
India under the indirect transfer provisions.
Question Nos 7 and 14: Overseas merger of non-corporate entities
Critical evaluation:
Offshore corporate mergers involving a direct transfer of shares of
Indian companies are exempt from tax in India, subject to certain
conditions as is codified in section 47(via).
The Finance Act, 2015 has inserted a provision in the income-tax
law [section 47(viab)] specifically exempting the transfer of shares
in a merging foreign company, that substantially derive its value
from underlying Indian shares of an Indian company, subject to
certain conditions. By virtue of this provision, in the above
example, the transfer of shares in the merging Fund I by its
investors, in exchange for shares in Fund II, should not be subject
to the indirect transfer provisions in the first place.
The CBDT clarification to the question raised, refers to the correct
section number in the income-tax law that confer the aforesaid tax
exemption that is granted to shareholders in foreign companies,
wherein the foreign company derives a substantial part of its value
from Indian assets, and merges with another company. However,
strangely, the CBDT clarification comes to an incorrect conclusion
by stating that such shareholders / investors in the merging foreign
company will be liable to tax in India on account of the indirect
transfer provisions.
Facts
Fund I and Fund II (both non-corporate entities) are set up in say
Luxembourg.
Fund I holds 100% of the shares in Fund III; Fund III has been set-up in say
Mauritius and is an India-focused entity.
Fund I is merged into Fund II. The merger is tax neutral in
Luxembourg. Investors in Fund I will become investors in Fund II on account
of the merger.
Questions framed to the Indian Government
Q7 - Will the indirect transfer provisions apply in case of offshore merger or
demerger of foreign non-corporate entities?
Q14 - Offshore merger of corporate entities involving a transfer of shares in
an Indian company is exempt from tax in India. Can this benefit be extended
to non-corporate FPIs and to the shareholders or unitholder of all the FPIs?
CBDT clarification
The indirect transfer provisions will be applicable to the merger of Fund I into Fund
II as there is no specific exemption from Indian taxes for an offshore merger of
non-corporate entities.
Question Nos 8 and 16: Clarification on “specified date” for valuation of
assets in India
Critical evaluation:
Offshore mergers of non-corporate entities involving a transfer of
shares of Indian companies are not specifically exempt from tax in
India.
The CBDT has remained silent on the applicability of the indirect
transfer provisions in the case of the unitholders of Fund I. Tax
technically, even the unitholders in Fund I should be subject to the
indirect transfer provisions.
The Shome Committee had recommended that all group
reorganizations that do not result in the change in ownership,
should be exempt from the indirect transfer provisions. However,
this aspect has not been considered while clarifying the question
on reorganizations involving non-corporate entities.
Facts
Fund I is registered in India as a FPI.
On the last date of preceding accounting period say March 31, 2016, the fund
has:
(i) More than 50% of total assets of the Fund in India; and
(ii) Value of assets of the Fund are greater than Rs 100 million (~US$ 1.47
million).
However, as on date of transfer (ie redemption) say July 15, 2016, only 47%
of the total assets of the Fund are in India.
The book value of the assets on the date of transfer does not exceed the book
value of assets as on the last day of the preceding accounting period by 15%.
Questions framed to the Indian Government
Q8 – Will the indirect transfer provisions apply even if the offshore transfer
does not fulfil the substantial value test (ie Indian assets should be more than
50% of the total assets of a fund) as on the date of transfer?
Q16 – Specified date for the purpose of the indirect transfer provisions means
the date on which the accounting period of the company or entity ends,
preceding the date of transfer of share or interest. The specified date should
be the date of transfer.
CBDT clarification
The value of the assets of the Fund in India will be computed as on the
“specified date” which will be:
(i) the last date of the accounting period preceding the date of transfer of the
shares/units of the Fund; or
(ii) the date of transfer, if the book value of the assets of the company on the
date of transfer exceeds the book value of the assets as on the last date
of the above mentioned accounting period by 15%.
Hence, in the example given, the specified date on which the value of the
Fund in India is to be seen in this case would be on March 31, 2016; not the
date of transfer ie July 15, 2016.
The indirect transfer provisions will apply since the offshore transfer fulfils the
substantial value test as on the specified date.
Adopting the specified date as on the date of transfer alone, may result in
abuse of the indirect transfer provisions.
Question No 9: Reporting requirements for Indian companies under the
indirect transfer provisions
Facts
A listed Indian company has received investment from several FPIs (including
offshore listed funds). At the offshore level, the shares / units of the FPIs are
purchased and sold on a daily basis and the investors in the FPIs keep
changing frequently.
Questions framed to the Indian Government
How should the Indian company determine whether the value of assets in
India of a FPI exceeds 50% of its total assets?
Where a FPI has invested into multiple Indian companies, there are practical
challenges for Indian companies to comply with the reporting requirements.
CBDT clarification
The specific reporting requirements have been recently introduced in the
Income-tax Rules, and their practical implementation should first seen.
Critical evaluation:
Indian companies are required to undertake an annual filing with
the CBDT, providing a plethora of information under the indirect
transfer provisions. These include, inter-alia,:
(a) Group structure of the offshore investor.
(b) Holding structure of the shares in the Indian company by the
offshore investor before and after an indirect transfer has been
implemented.
(c) Financial and accounting statements of the offshore investor
for two years prior to the date of an indirect transfer.
(d) Information regarding the offshore investor and its subsidiaries
such (i) business operation, (ii) personnel, (iii) finance and
properties, etc.
(e) Asset valuation report along with supporting documents.
The reporting requirements are fairly onerous and most Indian
companies may struggle to provide the information to the CBDT.
Failure to furnish the prescribed information to the CBDT could
lead to penal consequences for the Indian company.
Critical evaluation:
The CBDT’s clarification is a reproduction of the law, as it
currently stands. Accordingly, to determine the applicability of
the indirect transfer provisions; the valuation of the assets of the
Fund will have to be undertaken twice ie (i) on the date of transfer,
and (ii) on the last date of the preceding accounting period.
Question Nos 11 and 12: Threshold limits for small investors and value of
assets in India
Questions framed to the Indian Government
The threshold value of Rs 100 million (~US$ 1.47 million) specified for the
share / interest in an overseas entity for triggering the indirect transfer
provisions should be increased to Rs 1 billion (~US$ 14.5 million).
The carve-out prescribed in the income-tax law for “small investors” which is
5% or less of the voting power or share capital or interest in the company /
entity (whether individually or along with associated enterprises) should be
increased.
The term “associated enterprise” should be defined in line with what is
reckoned by the Securities and Exchange Board of India for the purpose of
ascertaining the common beneficial ownership of 50% in case of FPIs.
CBDT clarification
The 5% threshold limit for excluding the “small investors” from the ambit of
the indirect transfer provisions is reasonable and cannot be increased.
Alignment from the definition of “associated enterprise” with the SEBI
definition is not required as the definition under the Indian income-tax law is
well-founded and is based on the concept of management, control and
capital of an enterprise.
The monetary limit of Rs 100 million (~US$ 1.47 million) is reasonable
Question Nos 15, 17 and 18: Rules to determine the fair value of the Indian
assets vis-a-vis global assets
Critical evaluation:
The concerns of the stakeholders, especially FPIs, for an increased
threshold has been summarily rejected by the CBDT.
Pertinently, the Shome Committee had recommended that the
threshold for “small investors” should be in line with the Indian
transfer pricing provisions ie 26%.
Facts
Rules to determine the fair market value of India assets vis-à-vis global
assets should be prescribed.
The manner of determining the cost of acquisition in the hands of the non-
resident transferor including clarity on indexation benefit and foreign
exchange fluctuation should be provided.
The indirect transfer provisions should be operationalized only after
necessary rules have been prescribed.
CBDT clarification
The CBDT has vide notification S.O.2226(E) dated June 28, 2016 has
prescribed the relevant Rules 11UB and 11UC under the Income-tax Rules,
1962, providing the method for determining the value of assets and
apportionment of income under the indirect transfer provisions.
The availability of indexation benefit and foreign exchange fluctuation will be
as per the Indian income-tax laws.
The indirect transfer provisions have already been operationalized.
Question No 19: Applicability of withholding tax provisions, interest and
penalty in case of FPIs
Critical evaluation:
The questions relating to prescribing valuation rules seems to
have been raised to the Indian Government, before the CBDT had
prescribed the valuation rules in June 2016.
At present, cost indexation benefits are available for tax payers on
transfer of long-term capital assets. There is no inherent bar for
non-resident tax payers from claiming cost indexation benefits,
which should apply in case of transfer of shares in an offshore
entity.
Question framed to the Indian Government
FPIs may find it difficult to comply with the indirect transfer
provisions. Hence, FPIs should be relieved from withholding tax
requirements; alternatively, the threshold for enforcing withholding tax
requirements should be increased in case of FPIs.
No penalty of interest should apply to FPIs for failure to withhold taxes, on
account of retrospective application of the indirect transfer provisions and a
FPI should not be treated as an ‘assessee-in-default’ or the ‘representative
assessee’ on account of retrospective application of the indirect transfer
provisions.
CBDT clarification
The provisions of withholding tax, interest and penalty shall apply as per law.
Critical evaluation:
Since the introduction of the indirect transfer provisions in 2012,
offshore investment funds that get impacted by the indirect
transfer provisions, have not been withholding taxes on
redemption of shares / units held by their investors, based on the
recommendations that were made by the Shome Committee to the
Indian Government on the indirect transfer provisions and their
applicability to offshore investment funds. Indian tax officers have
also not actively probed this issue / questioned FPIs on this issue.
However, the above CBDT circular, which is binding on tax
officers, could create complications. One will need to wait and
watch to see how tax officers react to the above CBDT
clarification.
1 Income-tax Act, 1961
2 Vodafone International Holdings BV vs UOI (341 ITR 1) (SC)
3 Speech of the Finance Minister in the lower house of the Parliament on May 7, 2012
4 Draft Report on Retrospective Amendments Relating to Indirect Transfer – Expert Committee (2012)
Conclusion:
The present Government’s election manifesto stated that, inter-
alia, it was committed to providing a simple, rationale, non-
adversarial, stable and predictable tax regime in India. The New
Circular issued by the CBDT seems to go against the
Government’s aforesaid stated objectives of providing a
predictable and stable tax regime. The New Circular merely
reiterates the existing law in relation to the indirect transfer
provisions that was enacted by the previous Indian Government;
contrary to general expectations, the New Circular does not grant
any relief to FPIs, from the indirect transfer provisions.
The New Circular seems to have ignored some of the
recommendations of the Shome Committee for rationalizing the
indirect transfer provisions and specifically, exempting FPIs from
the applicability of these provisions.
This is something the Government should consider remedying on
a priority basis. This could be done by way of an amendment to
the income-tax law, in the Union Budget 2017 which is to be tabled
before the Parliament on February 1, 2017.
In closing, one should also keep in mind that foreign investors that
are impacted by the aforesaid indirect transfer provisions, should
be eligible to claim tax treaty relief, under their respective tax
treaties that they will be able to access. However, for investors
that do not have access to tax treaties or whose tax treaties are not
beneficial, such investors are likely to be impacted by the
aforesaid circular. Additionally, even where taxes are paid in India
on account of the indirect transfer provisions, such taxes may not
be creditable in the investors’ home country, resulting in an
additional tax burden being case upon the foreign investors.
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