1. The contents of this document are confidential Whether M&A is a Tax Planning Tool Assocham Conference May 2016 May 27 2016 Himanshu Sinha

2. Most M&As are not tax driven Driven by commercial objectives generally – choice of mechanism/vehicle is driven by tax efficiency Very seldom M&A is done purely for tax objectives – Inversion of US companies to reduce the effective tax rate is an example Recent instances: Eaton Corporation to Ireland, 2012, Actavis to Ireland, 2013, Liberty Global to the United Kingdom, 2013, Burger King to Canada, 2014, Medtronic to Ireland, 2015, Mylan to the Netherlands, 2015, Arris Group to the UK (2016) Eaton Corporation ActavisLiberty GlobalBurger KingMedtronic MylanArris Group 2

3. Common objectives of Tax Driven M&As 3 Reducing overall tax burden of the business income – ETR reduction of the group Avoiding payment of capital gains tax on sale of business/assets Avoiding payment of tax on migration of assets or people or capital within the group with a view to reduce future ETR Avoiding payment of DDT on accumulated profits

4. Main drivers of use of M&A as tax planning tools 4 Capital gains tax free/neutral treatments of mergers, demergers, conversions and parent-subsidiary transfers Unique tax treatment of slump sale and asset sales Retrospectivity of mergers Section 56 consideration of gift of shares Avoiding implications of transfer pricing law of ALP Avoiding VAT on sale of assets – itemized sale

5. Common examples of use of M&A as tax planning tools 5 Use of Tax treaties – like Mauritius, Singapore etc. Migration from places like US to Mauritius to get the benefit from grandfathering provision Buy-back of shares for avoiding DDT – characterizing dividend as capital gains – introduction of Buy-back tax Use of court sanctioned schemes for reorganization to avoid buy back tax – now plugged by the Finance Act, 2016 Characterizing other types of income as CG – e.g. interest by issuing hybrid instruments which are debt instruments but structured as equity or vice-versa Avoiding Section 56 tax on gift of shares by carrying out a slump sale of the business

6. Role of the income tax dept in the court process during a court approved merger or demerger or capital reduction or buy-back of shares has often been to object to the scheme Courts’ approach in general has been to approve the scheme while retaining the right of the tax dept to impose tax during assessment proceedings Income-tax dept’s role in a court scheme 6

7. 7  GAAR – post April 1, 2017  Impact of BEPS recommendations of OECD Looking Forward

8. 8 Thank You

9. The contents of this document are confidential Himanshu is Partner at Trilegal and heads the Tax practice. He has advised clients on entire range of direct tax matters including International Tax, Transfer Pricing and Tax Controversies. He has more than eighteen years of experience in Direct Taxes. He has represented large MNC clients before the Tax Tribunal, Authority for Advance Rulings and the higher courts with reported judgments to his credit. He has handled transactions involving complex tax issues, both cross-border and domestic. He has negotiated Advance Pricing Agreements with the Government on behalf of well-known global companies. Prior to joining Trilegal, he worked with a Big Four accounting firm. Himanshu spent more than a decade in the Indian Revenue Service (IRS) where he worked as Assistant Commissioner of Income Tax, Deputy Director (Investigation), Deputy Director (International Tax) and Transfer Pricing Officer. He is currently serving as a member of one of the focus groups of the Tax Administration Reform Commission set up by the Ministry of Finance, Govt. of India. He has been named as one of the leading Tax Controversy leaders of India by International Tax Review in 2014. Himanshu is an alumnus of Campus Law Centre, Delhi and Harvard Law School. He is a member of Bar Council of Delhi, India. Tax M&A contact at Trilegal Himanshu Sinha 9 Partner T+91 11 4259 9200 EHimanshu.Sinha@trilegal.com