Category Archives: INTERNATIONAL FINANCIAL MANAGEMENT

Under the Automatic Route The financial limit for automatic overseas business acquisition, without  without reference either to the Government or the RBI, on a back to hack  ass, that is, through stock swap stock swap is as follows: (j) US dollar 100 million or (ii) Upton 10 times the export earnings of the indistinguishable  investing company during preceding year, as reflected in the audited balance sheet of

Nouns for Overseas Business Acquisition Through AD/GR acquisition by Indian companies-c-engaged in infonnation technology and entertainment software,  pharmaceuticals and biotechnology- through AOL GR stock swap are briefly discussed below. The norms extend to Indian com panics engaged in (I) infonnation technology and  entertainment software, (ii) pharmaceuticals, (iu)  biotechnology and (iv) any other activi

Disinvestment of Shares by Indian Companies The operative guidelines for disinvestment 01 shares by Indian companies in the overseas market,through issue’ of Assignors, is surprised  below. .  (I) Disinvestment of holdings,  y shareholders of Indian companies in the overseas markets would be allowed through the mechanism of sponsored AD GR issue   cording t( whether they are (a) listed in India, (b) not

  Unlisted Two-Way Fungibility of ADRs GDRs funj(il;ility of ADRs/GDRs under the’ issue of FCCBs and ordinary shares, through the depository  receipt mechanism, arc summarised  below. (a) Re-issuance of ADRs/GDRs. would be permitted to the extent of ADRs/GDRs that have been rlde med into underlying shares   and sold in the domestic market. The arrangement is demand driven, with the process of reconvers

Gift tax and Wealth Tax Holding of GDRs/ADR~ in the hands of non-resident investors and holding of the underlying  shares hy the ODB in a fiduciary capacity and  he transfer of the GDRs/ADR~ between nonresident  nonresident investors and the ODB would he exempt from wealth tax under the Wealth lax Act,   and from gift tax under the Gift Tax Act. 1958, Operative Guidelines These relate to (i) automatic route of

Application of Avoidance of Double Taxation Agreement in Case of Global  ican Depository Receipts During the period of fiduciary ownership of shares in the hands of the ODB, the provisions of  Avoidance of Double Taxation Agreement,  entered into by the Government of India with the  country of residence of the ODB, would he applicable in the matter of taxation of income  from  dividends from underlying shares

Taxation uation the provisions of the Income Tax Act, income by way of dividend on shares issued under  GDR ADR mechanism would be taxed at the rate  f 0 per cent. The issuing company should er the net dividend payments after remitting tax at source to the ODB. On receipt of these payments, the ODB should distribute them to non-resident investors, proportionate to their holdings   of GGDR ADRs evidencing relev

Taxation on Foreign Currency Convertible Bonds interest payments on bonds, until the conversion option is exercised, would be subject to ction of tax at source at the rate of ten per cent. Tax  n dividend on the converted portion of FCCB would be subject to deduction of tax at source at the rate of ten per cent. Conversion of  CBs  nto shares would not give rise to any capital gains liable to income tax in Ind

Transfer and Redemption A non-resident holder of GDRs/ADRs may transfer them, or may ask the ODB tQ redeem them, In  the case of redemption, the ODB should  request the DCB to get the corresponding underlying shares  shares released in favour of the non-resident investor, for being sold directly on his  behalf, or transferring them in the name of the non-resident in the books of account of the issuing company,

Units of Foreign Investment in the Issuing Company The ordinary-shares and FC-::R:.issued against GDR~/ADR~should be treated as direct foreign investment  in the issuing company. The  aggregate of the foreign investment, made either directly or indirectly through GDR ADR mechanism, should not exceed 51 per cent of the  issue and the subscribed capital of the issuing company. However, investments made through o