New Publication: Taxing Offshore Indirect Transfers in India

The infamous indirect transfer provisions were introduced under the Indian tax law as a knee jerk reaction to the Supreme Court’s decision in case of Vodafone International Holdings with retroactive effect from April 1, 1962. The indirect transfer provisions have been a source of protracted litigation and tax uncertainty for foreign investors. Pursuant to the introduction of indirect transfer provisions, tax demands were raised in 17 cases, few of which also spurred investment treaty arbitration cases against India.

Our research paper on “Taxing Offshore Indirect Transfers in India” is a comprehensive summary of the indirect transfer provisions including the history of its introductions, the amendments made to Indian tax law to provide exemptions and clarifications, compliance and reporting requirements etc. While the retroactivity of the indirect transfer provisions was removed in 2021, not all dust has been settled and there exist quite a few issues with respect applicability of these provisions.

In this paper, we have discussed the several issues concerning indirect transfers such as availability of tax treaty exemption, issues for institutional investors, M&A exemptions, interplay with GAAR and impact of these provisions in negotiation of tax indemnities. Further, we have also discussed the approach adopted by OECD, UN and other jurisdictions such as China, Peru etc. for taxing the indirect transfers and issues in resolving tax disputes through investment arbitration.

Given that most of the foreign investments in India have been generally made through foreign intermediate entities, assessing the impact of indirect transfer provisions on transactions involving such entities becomes essential. We hope this paper will be useful in providing detailed insight into these provisions.

Please click here to access our paper.

Please do not hesitate to contact us if you have any queries.

For any help or assistance, please email us on ndaconnect@nishithdesai.com.

Do visit us at www.nishithdesai.com.