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Govt puts on hold move to tax indirect transfers
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SME Times News Bureau | 18 Jan, 2017
In a measure of relief to
foreign portfolio investors (FPIs), venture capital and private equity
investors, the government on Tuesday said it is putting on hold its
recent circular on taxation of indirect transfers.
India's
Central Board of Direct Taxes (CBDT) had on December 21 issued a
circular applying indirect transfer provisions on FPIs whereby any
profits made by funds with the underlying assets would have been taxed,
including equities in India.
Application of these provisions
would have subjected foreign portfolio investors to greater scrutiny by
the Income Tax department and would have led to double-taxation in many
cases.
"After the issue of the aforementioned circular,
representations have been received from various FPIs, FIIs (foreign
institutional investors), VCFs (venture capital funds) and other
stakeholders. The stakeholders have presented their concerns stating
that the circular does not address the issue of possible multiple
taxation of the same income," a Finance Ministry release here said. "The
representations made by the stakeholders are currently under
consideration and examination. Pending a decision in the matter the
operation of the above mentioned circular is kept in abeyance for the
time being," it said.
Indirect transfer provisions deal with
taxation of transactions, where even though the transfer of shares
happened overseas, the underlying assets were in India.
Indirect
transfer provisions were introduced in the Income Tax Act in 2012, with
retrospective effect cluase by which the Indian government sought to
bring British telecom major Vodafone's $11 billion acquisition of
Hutchison Essar in 2007 and other such transactions under the tax net.
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