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Vodafone Denies Tax Claim

by Mary Swire, Tax-News.com, Hong Kong

02 August 2010


The UK’s delegation to India, headed by Prime Minister, David Cameron, aims to bring the countries' relationship to a new level; but telecom giant Vodafone, one of the UK’s major investors in India, remains embroiled in an unresolved USD2bn tax dispute.

The Indian Income Tax department would have Vodafone deduct USD2bn withholding tax on their behalf in respect of the seller’s alleged capital gains tax liability on the sale of a controlling interest in a major Indian cellphone network, which Vodafone acquired from Hutchison in 2007.

While reiterating his commitment to expand operations in India, Vodafone chief executive Vittorio Colao said in advance of UK Chancellor, George Osborne’s meeting with Finance Minister Pranab Mukherjee: “We continue to be convinced and advised that no tax is due. We have made an acquisition in this country. We have not sold assets.”

Vodafone contends that the Indian income tax department has no jurisdiction in respect of the tax claim, the deal being between a Vodafone Netherlands holding company and Hutchison, which is incorporated in the Cayman Islands.

The UK Business Secretary Vince Cable had indicated in a TV interview that Osborne would raise the matter in his meeting with Mukherjee, but Osborne would only confirm that it is a matter for the courts and complimented India on its “impartial judiciary and independent legal system”.

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TAGS: court | capital gains tax (CGT) | tax | business | holding company | India | Netherlands | interest | law | Cayman Islands | withholding tax

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