Tax changes: Why Vodafone may invoke India-Netherlands treaty

New Delhi: Terming the move to tax cross-border deals with retrospective effect as "grossly unjust",UK-based telecom giant Vodafone today said it is considering various courses of action to safeguard its position in India.

While Vodafone did not give details of possible recourse it may take, it is being speculated that the Group, which may have to pay Rs 11,000 crore in taxes on a 2007 acquisition if the Parliament passes the law change, could invoke the terms of an India-Netherlands treaty to get compensation.

Vodafone says govt moves to make it pay Rs 11k tax unjust. AFP

The government proposes to amend the Income Tax Act with retrospective effect to override a Supreme Court ruling that held Vodafone wasn't liable to pay tax on its $11.2 billion acquisition of 67 percent stake in Hutch Essar from Hong Kong-based Hutchison Telecom, as the deal was done between two foreign entities overseas.

"We can confirm that we are urgently considering a number of courses of action, both in India and internationally, in consultation with our advisers and we continue to discuss these issues with a wide range of stakeholders both in India and internationally," Vodafone Group said in a statement. It, however, did not give details.

The bilateral pact between India and the Netherlands allows companies to claim back taxes in case they are forced to pay.Vodafone asserted its position of no dues after it was affirmed by Supreme Court, which ruled in its favour.

The Indian government has already refunded Rs 2,500 crore along with four percent interest to Vodafone, following dismissal of its review petition against January 20 order by the Supreme Court.

"The proposed changes in the Finance Bill fundamentally contradict the firm conclusions of the apex court and as such raise important constitutional questions for India as well as widespread and profound concerns in the minds of international investors," Vodafone said.

In the $11.2 billion deal in May 2007, Vodafone had acquired 67 percent stake in the Hutchison-Essar Ltd (HEL) from Hong Kong-based Hutchison Group through companies based in the Netherlands and Cayman Island.


Updated Date: Dec 20, 2014 07:25 AM

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