Tax Havens Draw 1/3rd of Indian Funds

Almost one-third of the money that is invested abroad as outbound investment have been in tax havens. Over 80 companies invested in countries like Mauritius, British Virgin Islands and Cyprus popularly known for their liberal taxation regimes, where usually not many questions are asked about investments to and from these markets. Investments by Indian companies in overseas markets were over $5 billion in June, according to a Reserve Bank of India release on overseas direct investment, which the central bank has put in public domain for the first time. However, much of these outflows ($3. 9 billion) are in the form of guaranteed issues. Outflows worth $600 million are in equities and $900 million is in the form of debt. Most of the investments are in wholly-owned subsidiaries and joint ventures. Mundra Port was the highest investee in the overseas market, with a $2. 2-billion investment as credit guarantee in Australia, followed by Biocon which made a $350-million investment in its Malaysian subsidiary and Sun Pharmas $300-million investment in British Virgin Islands. Put simply, a tax haven is a foreign country that has unique offerings for investors, the primary one being relatively low tax rates in comparison to other countries. Jigar Saiya, partner at MZS & Associates, said: Countries like Mauritius have an exemption of capital gains tax. In India, a company has to pay 30% on the operating income while in Mauritius it is 3%. Notably, Mauritius accounts for 60% of equity investments by Indian companies. Tax experts say countries such as British Virgin Islands are used by companies to save on tax in the US, where a company might have a base. - www.economictimes.indiatimes.com