Cash Repatriation from India

Report date: 
2 Jun 2020

India has always been a difficult and highly regulated environment. However, over the past few years, a lot of treasury actions which used to be very difficult are now possible. The country continues to have one of the region’s more aggressive tax regimes – they are particularly focused on transfer pricing – and there are still many regulations which are not always clear, and change regularly, but still have to be complied with.

  • Dividends are the preferred way of repatriating cash from India. Withholding tax applies, so there is a cost, and there are regulations to be complied with (capitalisation, audits and tax payments). But the process does work.
  • Two participants used management fees and royalties to remit cash out of the country. Again, prior approval is required, and the process is not simple.
  • A couple of participants have used intercompany loans. Same story: an onerous prior approval process.
  • Intercompany netting: gross in, gross out, is possible. One participant was centralising all cross border activities into a single entity within the country before netting, and using a non resident rupee account.
  • Domestic cash pooling: mixed experiences, but it is possible No cross border cash pooling.
  • Legal structure: one company was structured locally as a LLP (Limited Liability Partnership), while another had looked at it and decided against it, due to opposition from local management. It was not clear what the benefits or disadvantages were – this was driven by Tax.
  • Mauritius: several participants have structures which route flows through Mauritius, to take advantage of the beneficial tax agreements. These work well.

Bottom line: everything in India takes time, and involves processes which are difficult and time consuming. But, if you put in the time and effort, things will generally work.

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