Flipkart-Walmart deal Taxmen see two angles to deal once goes through
New Delhi : Flipkart founders Sachin and Binny Bansal may have to pay 20 per cent capital gains tax if they sell their shares in the company as part of the proposed deal with US retail giant Walmart, say tax experts.
According to experts, there would be two taxation angles to the deal once it goes through.
The first will be taxation of capital gains earned by the sellers (Flipkart investors).
Secondly, whether Flipkart India is allowed to carry forward the losses for the adjustment against income tax payable by the company.
Nangia & Co Director Chirag Nangia said the taxability of the foreign investors in Flipkart will depend on the country through which the money is routed and whether India has a tax treaty with those nations.
“However, 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,” he said.
Transaction Square founder Girish Vanvari said the I-T law provides that taxes have to be withheld by the buyer if the share purchase agreement is being entered into with a non-resident entity.
“With regard to share purchase agreement entered into with India resident entity, Sachin Bansal and Binny Bansal in this case, capital gain would be charged in their hands and they have to pay 20 per cent income tax,” Vanvari said.
The deal would be taxable in India since a substantial value of Flipkart’s shares is being derived from India, the experts noted.
Singapore-registered Flipkart holds majority stake in Flipkart India. As per the proposed deal, Walmart is expected to acquire shares of the Singapore entity. This will effectively result in transfer of ultimate ownership in Flipkart India. Nangia said if the seller/transferor of such shares in Flipkart Singapore is a tax resident of Singapore/ Mauritius or any other country, which has a tax treaty with India that exempts capital gains from income tax in India, then the seller may claim treaty benefits.
$15-bn deal to be announced this week
New Delhi: US retailer major Walmart is close to clinching a deal to buy a majority stake in Flipkart for roughly $15 billion, according to sources.
The deal, which will see some of the biggest investors in Flipkart offloading their stake in the country’s largest e-commerce company, is likely to be announced before the end of this week, sources with direct knowledge of the development said.
Japan’s SoftBank Group Corp and Tiger Global Management are said to be selling almost all of their about 20 per cent stake each in Flipkart. Walmart will likely end up with 60-80 per cent of Flipkart, valuing the company at about $20 billion, they said.
Flipkart was valued at about $12 billion last year, according to researcher CB Insights. E-mails sent to Walmart and Flipkart remained unanswered.