In June 2018, one of the largest acquisitions in the history of E-commerce companies was announced.
U.S. retail giant, Walmart has acquired a 77% stake in Flipkart, the largest e-commerce company in India, for USD 16 Billion. This has made Walmart the majority shareholder in Flipkart, acquiring it's 77% from the existing promoters and other investors including Softbank.
Since Flipkart’s holding company is located in Singapore, and the investors are from various treaty and non-treaty countries, the deal will involve many tax complications. The transaction also becomes unique because the shares of the holding company (based in Singapore) are sold rather than the Indian company. This will trigger the indirect transfer provisions that India introduced on retrospective taxation after the Vodafone case. Potential challenges could be treaty protection in the case of indirect transfer and denial of carrying forward of billions of dollars in tax losses due to change of ownership.
The Indian government’s approach has been proactive, and they have offered to help Walmart compute the tax and guide them.
This transaction also underscores the fact that India remains one of the most attractive markets for foreign investors.
Ashok Maheshwary & Associates LLP views on the tax issues pertaining to this large deal have been widely published in the Indian media. Click the links below to learn more.
