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Vodafone Handed Indian Tax Bill Reminder

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

08 January 2013


Telecoms giant Vodafone has confirmed that it has received a "reminder" from the Indian tax authorities relating to a back tax bill that was thought to have been settled by a court ruling earlier this year, a sign that the dispute over its 2007 acquisition of Hutchinson Essar is unlikely to end soon.

Vodafone appeared to have won its battle in January, 2012, when India's Supreme Court ruled that the company was not liable for a USD2.2bn bill in back taxes and penalties in connection with the acquisition. The government was also ordered to repay the USD496m deposit paid by Vodafone in late 2010, plus 4% interest.

However, the subsequent introduction of the government's controversial Finance Bill raised concerns over whether retrospective changes to the Income Tax Act would allow the government to recover the disputed taxes. In September, Vodafone set aside USD2.2bn for the payment of its Indian tax liabilities, and announced that it may be willing to settle the bill, were any interest and penalty charges waived.

The latest communication from the Indian tax authorities has been described by Vodafone as a reminder. However, according to a statement released by the company, no deadline for payment has been set out. Vodafone has replied to the reminder, stating that it continues to believe that no tax is payable on the transaction, but inviting government ministers to meet with its representatives to discuss the matter and find a solution.

TAGS: compliance | tax | tax compliance | India | interest | law | tax authority | offshore | multinationals | controlled foreign corporations (CFC) | penalties | telecoms

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