1. Nishith Desai Associates © Legal and Tax Counseling Worldwide 5 th IFA Conference on International Taxation & Transfer Pricing, Ahemadabad GLOBAL BUSINESS MODELS International Tax Challenges & Opportunities

2. Tuesday, June 09, 20152© Nishith Desai Associates What is a “Business Model”?

3.  “A business model is a conceptual tool that contains a big set of elements and their relationships and allows expressing the business logic of a specific firm. It is a description of the value a company offers to one or several segments of customers and of the architecture of the firm and its network of partners for creating, marketing, and delivering this value and relationship capital, to generate profitable and sustainable revenue streams.” — Osterwalder, Pigneur and Tucci (2005) Tuesday, June 09, 20153© Nishith Desai Associates WHAT IS A BUSINESS MODEL?

4. The subscription business model The razor and blades business model (bait and hook) The pyramid scheme business model The multi-level marketing business model The network effects business model The monopolistic business model The cutting out the middleman model The auction business model The online auction business model The bricks and clicks business model The loyalty business models The Collective business models The industrialization of services business model The servitization of products business model The low-cost carrier business model The online content business model The freemium business model The premium business model The direct sales model The professional open-source model Various distribution business models Tuesday, June 09, 2015© Nishith Desai Associates4 Types Of Business Models

5. The eComTaxpert Report studied 28 business models relating to the E-Commerce industry Tuesday, June 09, 2015© Nishith Desai Associates5 Types Of Business Models

6. Tuesday, June 09, 20156© Nishith Desai Associates

7. Tuesday, June 09, 20157© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

8. Tuesday, June 09, 20158© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

9. Tuesday, June 09, 20159© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

10. Tuesday, June 09, 201510© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

11. Tuesday, June 09, 201511© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

12. Tuesday, June 09, 201512© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

13. Tuesday, June 09, 201513© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

14. Tuesday, June 09, 201514© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

15. Tuesday, June 09, 201515© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

16. Tuesday, June 09, 201516© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

17. Tuesday, June 09, 201517© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

18. Tuesday, June 09, 201518© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

19. Tuesday, June 09, 201519© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

20. Tuesday, June 09, 201520© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

21. Tuesday, June 09, 201521© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

22. Tuesday, June 09, 201522© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

23. Tuesday, June 09, 201523© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

24. Tuesday, June 09, 201524© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

25. Tuesday, June 09, 201525© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

26. Tuesday, June 09, 201526© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

27. Tuesday, June 09, 201527© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

28. Tuesday, June 09, 201528© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

29. Tuesday, June 09, 201529© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

30. Tuesday, June 09, 201530© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

31. Tuesday, June 09, 201531© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

32. Tuesday, June 09, 201532© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

33. Tuesday, June 09, 201533© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

34. Tuesday, June 09, 201534© Nishith Desai Associates E-COMMERCE BUSINESS MODELS

35.  Globalization is sourcing from where a product is cheapest and selling where it is dearest  But taxation can distort this equation Tuesday, June 09, 201535© Nishith Desai Associates Global Business & Tax Issues

36. International Tax Issues  Harmonization of different legal and tax systems; and  Creating the most tax efficient structure Tuesday, June 09, 201536© Nishith Desai Associates Global Business & Tax Issues

37. Law Tax Strategy Tuesday, June 09, 201537© Nishith Desai Associates Global business & Tax Issues

38. Law Tax Strategy Public International Law Legal System of Intermediate Country Private International Law Legal System of Investor Country Tuesday, June 09, 201538© Nishith Desai Associates Global Business & Tax Issues

39. Tuesday, June 09, 2015© Nishith Desai Associates39 Strategy Circle

40. Tuesday, June 09, 2015© Nishith Desai Associates40 Investment Structure Outbound - Equity Host Country HoldCo 2 HoldCo 1 Holding Company India Company Corporate Laws Tax Exchange Controls Direct investment Investment through Holding Company Investment through 2-Tier Holding Structure

41. Tuesday, June 09, 2015© Nishith Desai Associates41 Investment Structure Outbound Instrument Host CountryIndia Equity Debt Hybrid Instruments Corporate Laws Tax Exchange Controls

42. Tuesday, June 09, 2015© Nishith Desai Associates42 Where & How To Hold Intellectual Property? Indian Pharmaceutical Company Intellectual Property

43. Investing in USA -Whether LLC or Inc.? Tuesday, June 09, 2015© Nishith Desai Associates43 India US LLC Business

44. Tuesday, June 09, 2015© Nishith Desai Associates44 Investing in USA -Whether LLC or Inc.? IndiaUS Inc. US LLC. Local US Investors

45.  Can a foreign company merge into and Indian company?  Does foreign law permit corporate migration?  What are the implications? Tuesday, June 09, 2015© Nishith Desai Associates45 Cross-Border M&A

46. o Domestic Taxation is an Obligation o Foreign Taxation is a Cost Tuesday, June 09, 201546© Nishith Desai Associates CHALLENGES AND OPPORTUNITIES  If not planned right, taxation by multiple jurisdictions may magnify this cost manifold  However, if planned right, these costs can disappear!

47. CURRENT CHALLENGES: –The Theory of Nexus & Extra-Territorial Intervention –Transfer of Intellectual Property –OECD Model Guidelines in light of advent of Technology Tuesday, June 09, 201547© Nishith Desai Associates International Tax Challenges

48.  CASES: –Ishikawajima-Harima Heavy Industries Ltd. –Hyundai Heavy Industries Co. Ltd. –Morgan Stanley –SET Satellite  SUB-JUDICE CONTROVERSIES: –Genpact –Vodafone Tuesday, June 09, 201548© Nishith Desai Associates International Tax controversies

49.  FRACTURING A TRANSACTION  NUMBER OF STRUCTURING POSSIBILITIES: –Holding Companies for Investments & Capital Gains –Jurisdictions to hold IP for License & Royalty –System Arbitrage –Hybrid Instruments –Hybrid Entities –Migration of Companies –Triangular Situations Tuesday, June 09, 201549© Nishith Desai Associates International Tax Opportunities

50. International Tax Challenges & Opportunities  Double (or Multiple) Taxation v. Double Non-Taxation  Tax Avoidance v. Tax Evasion  Tax Havens v. Tax Havens  Tax Treaty Situations v. Non-Treaty Situations  Physical Commerce v. E- Commerce  Pure Breed Instruments v. Hybrid Instruments  Pure Breed Entities v. Hybrid Entities  Mutual Agreement Procedure v. Arbitration  Residents v. Non-Residents  Branch v. Subsidiary  Capital Gains v. Business Income  Transfer of Tangibles v. Transfer of Intangibles  Triangular Situations v. Treaty Shopping  Permanent Establishment v. Permanent Establishment ……………. And the list could go on…. Tuesday, June 09, 2015© Nishith Desai Associates50

51. Tuesday, June 09, 2015© Nishith Desai Associates51 Thank You nishith@nishithdesai.com Nishith Desai Associates Legal and Tax Counselling Worldwide Mumbai 93 B, Mittal Court, Nariman Point, Mumbai 400 021, India Ph : 91 22 6669 5000 Fax: 91 22 6669 5001 Bangalore Prestige Loka, G01 7/1 Brunton Road, Bangalore 560025, India Ph : 91 80 6693 5000 Fax: 91 22 6693 5001 Silicon Valley 220 California Av. Suite 201, Palo Alto CA – 94306, USA Ph : 1 650 325 7100 Fax: 1 650 325 7300 Singapore Level 30, Six Battery Road, Singapore – 049909 Ph : 65 6550 9855 Fax : 65 6550 9856