British telecoms group Vodafone has served the Indian government with a notice of dispute in relation to a proposal from India’s finance ministry to amend some tax rules.
The move constitutes the first step required prior to commencing international…
British telecoms group Vodafone has served the Indian government with a notice of dispute in relation to a proposal from India’s finance ministry to amend some tax rules.
The move constitutes the first step required prior to commencing international arbitration under the Bilateral Investment Treaty (BIT).
As part of India’s 2012-2013 budget, unveiled in mid-March, India’s finance ministry proposed to tax all acquisitions of local assets by foreign companies since 1962.
This proposals came just months after India’s Supreme Court had concluded that Vodafone was not liable for a US$2.4bn withholding tax bill linked to the purchase of a 67% stake in Hutchison Essar (now known as Vodafone India) in 2007.
In a statement today [17 April], Vodafone said that the proposed retrospective tax legislation, if enacted, “would have serious consequences for a wide range of Indian and international businesses, as well as direct and negative consequences for Vodafone.
“The proposed legislation would also countermand the verdict of the Indian Supreme Court in January 2012, which ruled that Vodafone had no liability to account for withholding tax on its acquisition of indirect interests in Hutchison Essar in 2007.”
According to Vodafone, the Indian government must provide “accord fair and equitable treatment to investors,” under the BIT.
The company said that if an amicable solution cannot be reached, it would launch arbitration proceedings against the Indian government.
