Investing in India PRESENTED BY: SUZANNE, VALENTIN, BLAKE

Political Situation  India is a union of States  Head of the Union is the President  Real executive power = Council of Ministers (source india.gov.in)  Two main political parties  Congress  Bharatiya Janata Party (BJP)  Recent emergence of regional political parties  Last elections = 12 May 2014, Narenda Modi (BJP) elected PM  Increasing local power

Economic Situation  GDP per Capita = $1,500  Main fields of industrial and business activity  Agriculture: 16.9%  Industry: 17%  Services: 66.1%  Poor conditions of infrastructure  Main industrial and business activity in Mumbai  Financial center  Entertainment  Shipping

Tax Legislation  All Income is Taxable  Corporate income tax rate ≈ 34%  Residence = Incorporation or Place of Effective Management principle  Definition of “Residence” largely based on Article 4 OECD MTC and UN Model  Residents are taxed on worldwide income  No Traditional VAT system  Instead, “Central Value Added Tax”

Tax Legislation  Withholding Tax  Interest: 10%  Royalties (including fees for technical and professional services): 10%  Dividends: 20%  Tax Incentives  Software development industry  Preferential treatment of interest payments to foreign lenders  Deductions for capital expenditures

Tax Legislation  Anti-Avoidance Legislation  GAAR legislation is in progress  Transfer pricing  No exit tax  Domestic law mitigates double taxation  Foreign tax credit  Relationship to tax treaty law

Tax Legislation  Tax Treaty Network  Over 100 tax treaties  Growing network  US-India DTC  Based on the US Model Tax Convention  Differs from the model for interest, royalties, dividends  Limitation on Benefits  Credit method for mitigation

SWOT Analysis  Strengths  Tax incentives, specifically for software  Extensive tax treaty network, especially with the US  No dividend tax at the shareholder level  Weaknesses  Heavy bureaucracy  High corporate tax rate  US-India DTC provision on royalties

SWOT Analysis  Opportunities  Developing country  Large population, ≈ 1.1 billion  Government initiative to improve infrastructure  Threats  Improving workforce also demands higher wages  Potential low demand for computer software

Sources  India.gov.in  diplomatie.gouv.fr  World Bank  The Economist  The IMF  IBFD Corporate Taxation India