The Crossbill News Desk
In 2023-24, approximately 56% of India’s outward foreign direct investment (FDI) was directed to tax havens, including Singapore, Mauritius, the United Arab Emirates, the Netherlands, the United Kingdom, and Switzerland.
According to data analyzed from the Reserve Bank of India (RBI) and reported by The Hindu, of the total outward FDI of Rs. 3,488.5 crore, about Rs. 1,946 crore was routed to these low-tax jurisdictions.
The analysis further revealed that three countries – Singapore (22.6%), Mauritius (10.9%), and the UAE (9.1%) – together accounted for over 40% of India’s outward FDI during the financial year.
The trend appears to be gaining momentum, as in the first quarter of the current financial year alone, investments directed toward these jurisdictions surged to 63% of India’s total outward FDI.
Riaz Thingna, Partner at Grant Thornton Bharat, explained the rationale behind this practice.
“If Indian companies are making investments outside India, then having them through a company set up in one of these jurisdictions makes a lot of sense,” he told The Hindu.
Thingna elaborated that If an Indian company wants to set up a subsidiary in Europe, the US, or any other country, then doing it through a special purpose vehicle in countries such as Singapore or other low tax jurisdiction will help them in getting strategic investors, and in providing better tax positioning at the time of stake dilution.
He also pointed out that, “These jurisdictions are also more flexible in transferring funds and investments on a day-to-day basis. So, very often, these investments are not being made only to evade, avoid or reduce tax. They are often made because these jurisdictions form platforms for investment in third countries.”
The data indicates a sharp rise in India’s outbound FDI, which in June this year increased to $5.03 billion compared to $2.9 billion in the same month last year.
Outbound FDI is comprised of a financial commitment that includes equity, loans, and guarantees, reflecting the growing ambition of Indian companies to expand their global footprint.
According to data analyzed from the Reserve Bank of India (RBI) and reported by The Hindu, of the total outward FDI of Rs. 3,488.5 crore, about Rs. 1,946 crore was routed to these low-tax jurisdictions.
The analysis further revealed that three countries – Singapore (22.6%), Mauritius (10.9%), and the UAE (9.1%) – together accounted for over 40% of India’s outward FDI during the financial year.
The trend appears to be gaining momentum, as in the first quarter of the current financial year alone, investments directed toward these jurisdictions surged to 63% of India’s total outward FDI.
Riaz Thingna, Partner at Grant Thornton Bharat, explained the rationale behind this practice.
“If Indian companies are making investments outside India, then having them through a company set up in one of these jurisdictions makes a lot of sense,” he told The Hindu.
Thingna elaborated that If an Indian company wants to set up a subsidiary in Europe, the US, or any other country, then doing it through a special purpose vehicle in countries such as Singapore or other low tax jurisdiction will help them in getting strategic investors, and in providing better tax positioning at the time of stake dilution.
He also pointed out that, “These jurisdictions are also more flexible in transferring funds and investments on a day-to-day basis. So, very often, these investments are not being made only to evade, avoid or reduce tax. They are often made because these jurisdictions form platforms for investment in third countries.”
The data indicates a sharp rise in India’s outbound FDI, which in June this year increased to $5.03 billion compared to $2.9 billion in the same month last year.
Outbound FDI is comprised of a financial commitment that includes equity, loans, and guarantees, reflecting the growing ambition of Indian companies to expand their global footprint.
Comments (0)
Leave a Comment