|India Proposes new Tax on Foreign Mergers|
Proposed legislation would enable government to tax any overseas merger dating back to 1962
India signaled it wants to levy a heavy retroactive tax on some international mergers, the latest discouraging development for foreign companies in one of the world's largest emerging markets.
The government recently proposed legislation that would allow it to tax any overseas merger dating back to 1962 in which an underlying Indian asset was transferred.
That unexpected move would override a sweeping Supreme Court decision on multinational transactions in January, creating a range of headaches and potential costs for foreign companies that are seeking to do, or have done, deals involving Indian companies.
The tax proposal was part of the finance bill that accompanies the annual Indian budget, which Finance Minister Pranab Mukherjee unveiled Friday. It wouldn't go into effect until the budget is finalized by Parliament in coming weeks, so there is time for any lobbying against it.
In January, the Supreme Court ruled that Vodafone didn't have to pay taxes of more than $2 billion on the deal it struck to enter India in 2007, when it acquired a controlling stake in an Indian cellphone company from Hong Kong's Hutchison Whampoa Ltd.
The opinions expressed do not constitute investment advice and specialist advice should be sought about your specific circumstances.
Published on our website on March 31, 2012