20% capital gains tax to be levied on FlipKart owners post stake sale to Walmart
As the flipkart-Walmart deal is on the verge of legal formalities, the industry experts are giving their option on the same. According to them, the owners of Flipkart might need to pay a 20% capital gains tax once the deal is finalized. The US giant Walmart is on its way to occupy 60 to 80 percent stake in Flipkart which is quite a big portion.
Formal announcement from the company about the sale is yet to come, but it is already declared that Walmart would be buying multiple FlipKart’s investors like Tiger Global and Softbank accounting up to 60 to 80 percent stake.
Once the deal is finalized, there could be two angles for the taxation, first being the taxation on the capital gains of the seller which is flipKart investor. Second could be showcasing of the company’s losses against the income tax to be paid. About taxation on the foreign investors, experts say that it will depend on the tax treaty India has with the nations through which the money is routed.
According to Nangia, “if the Indian promoters of Flipkart India intend to sell their shareholding, being Indian residents, they would be liable to pay income tax in India on capital gains arising from such transaction,”. The experts also say that the deal would be taxable in India as the major part of FlipKart’s shares are being derived from India itself.
Singapore registered FlipKart Pvt LTd holds majority stake in FlipKart India. The Walmart deal is with Singapore registered FlipKart and hence its maximum stake and ultimate ownership will fall in FlipKart India. However, the tax treaties between India and Singapore was amended and its exemption from capital gain tax was only till 31st March 2017.
Among all such speculations and calculations, it looks, this FlipKart-Walmart deal is going to affect everyone. What happens once the deal is finalized is a big curiosity among all.