Olivier De Moor and Brett Fieldston Author Article for EMPEA on Tax Efficiency for Investment in India
Emerging Market Private Equity Association has published the article “Structuring Funds for Investment in India: Maximizing Tax Efficiency for U.S. Investors,” written by Akin Gump tax partner Olivier De Moor and counsel Brett Fieldston.
With a tax treaty between Mauritius, where fund sponsors often domicile their funds, and India no longer providing an exemption from Indian capital gains tax, the authors discuss ways to structure India-focused private equity funds “in a manner that is intended to increase tax efficiency for U.S. tax-exempt and U.S. taxable investors.” For the latter group, they note that they may be subject to certain rules that are “intended to dissuade U.S. taxpayers from moving capital offshore to non-U.S. corporations where those non-U.S. corporations make investments in passive assets (including interest- and dividend-generating financial instruments) that could be made directly from the United States.”
De Moor and Fieldston advise fund sponsors and their U.S. tax advisors “to monitor closely Indian tax developments imposed on investment income/gains, as well as the tax status of each portfolio company within the platform for U.S. tax purposes.” Special consideration, they add, should also be given “to the rate at which Indian tax is imposed, as [foreign tax credits] may not be available to be utilized by U.S. taxable investors, and U.S. tax-exempt investors would likely experience any Indian tax as a noncreditable/non-deductible investment expense.”
To read the full article, which appeared in EMPEA Legal & Regulatory Bulletin, Fall 2017, please click here.