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Cross-Border Share Swaps: Amendments to Regulatory Framework
In order to simplify cross-border share swaps and address certain challenges under the existing regulatory framework, the Government of India has recently amended the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019. The amendment became effective on August 16, 2024. Previously, permissible share swaps were restricted to issue of equity instruments by an Indian entity to foreign residents in exchange for equity instruments of another Indian company. The amendment now allows secondary share swaps and exchanges of equity instruments for equity capital of foreign companies. However, certain ambiguities persist, such as limitations on swaps involving Indian resident individuals and lack of guidance on downstream investments by Foreign Owned Controlled Companies (“FOCCs”) using share swaps. Further, Indian tax laws do not grant tax neutrality to swap structures unless conducted via merger or demerger, making such transactions taxable unless covered by a tax treaty benefit.
Redefining Buy-back: Tax Implications under Finance Act (No. 2), 2024
Tax implications on share buy-backs have undergone significant changes pursuant to the amendments proposed to be introduced in accordance with the Finance Act (No. 2), 2024. In light of the amendments, companies and investors will need to reconsider their approach for exits and repatriation of surplus funds.
Direct Tax Vivad se Vishwas Scheme, 2024
The pendency of litigation under the Income-tax Act, 1961 has been rising due to two key factors: increasing number of appeals and slow disposal of such appeals. To address this growing backlog and to build on the success of the previous Vivad se Vishwas Scheme, 2020, the government has proposed the Direct Tax Vivad se Vishwas Scheme, 2024 (“VSV Scheme, 2024”). This note provides an overview of the VSV Scheme 2024.
Smooth Transitions: Navigating Succession in Business Transfers on Slump Sale Basis!
Succession of a business, in simple words, implies a change in ownership of a business from one person (“the predecessor”) to another (“the successor”). Section 170 of the Act deals with the provisions relating to income tax liability in the case of succession of business pursuant to any business restructuring – transfer of business, amalgamation, demerger, etc. This note discusses the tax implications that may arise pursuant to succession of a business by way of slump sale.