Principal Purpose Test – Impact on PE/ VC investments and M&A deals

Friday, January 31, 2025
(05:30 PM – 06:30 PM (IST))

 

INTRODUCTION:

The principal purpose test (“PPT”) has been introduced in Indian tax treaties pursuant to the MLI as a ‘minimum standard’. In so far as India-Mauritius tax treaty is concerned, a protocol was signed between India and Mauritius seeking to introduce PPT to the tax treaty. PPT denies benefit under a tax treaty in case where one of the principal purposes of the transaction is to obtain benefit under tax treaty. PPT does not apply in case where the object and purpose of the provision is the grant such benefit.

Recently, the Delhi Tribunal allowed a foreign portfolio investor to claim benefit under the India-Luxembourg tax treaty upon examining the facts of the case and held that the taxpayer passed the muster of PPT. This is one of the first cases wherein the tax department argued the applicability of PPT.

Earlier this month, the Indian government has clarified that the PPT will not be applicable cases which are covered by the grandfathered provisions under India-Singapore, India-Mauritius and India-Cyprus tax treaty. The government clarified that the bilateral commitments as reflected in the mutually agreed object and purpose of such grandfathering provisions are not intended to interact with PPT.

In light of the above developments, we are delighted to invite you to our webinar, ‘PPT – Impact on PE/VC investments and M&A deals’ wherein we will discuss:

• Effective date of PPT – what transactions are covered?

• Who benefits from the CBDT clarification?

• Are investments from Mauritius better-off than investments from Singapore?

• Will TRC be sufficient for claiming tax treaty benefits in case of grandfathered transactions?

• Impact on existing assessments on grandfathered transaction

• Fate of indirect transfers

• Interplay with GAAR

 

Speakers

Vikram Chand Professor International Tax Law & Policy

Prof Dr Vikram Chand is a Professor of International Tax Law & Policy at the University of Lausanne (UNIL), Switzerland. He currently also serves as the Program Director of the Executive Program in Transfer Pricing offered by UNIL and as a BEPS / Pillar 2 Advisor for the Asian Development Bank (ADB).

His main areas of research, teaching and consulting expertise relate to Pillar Two (Global Minimum Tax Rules), Corporate and Personal Tax Incentives, Transfer Pricing (including Amount B), Tax Treaties, Tax Controversy Management and the intersection between International tax law and other areas of International Law (e.g. International Trade Law or Bilateral Investment Treaties).

His expertise is evidenced by an extensive list of publications. For example, on the research front, he has published many articles in top peer-reviewed journals (such as the World Tax Journal, Intertax, British Tax Review and the International Tax Studies) or books (either monographs or edited books) with International Publishers (such as Kluwer Law, IBFD or Schulthess). His doctoral thesis - The Interaction of Domestic Anti-Avoidance Rules with Tax Treaties - was also shortlisted for the prestigious Frans Vanistendael Award that is conferred by the IBFD.

 

Dr. Nishith Desai Founder Nishith Desai Associates

Dr. Nishith Desai is the founder of the research & strategy driven international law firm, Nishith Desai Associates (www.nishithdesai.com) ranked amongst the Asia-Pacific’s Most Innovative Law Firms by Financial Times.

Nishith’s interest span a wide spectrum of law, society, and ethics. He is a renowned international lawyer, author, lecturer, researcher, innovator and thought leader. Nishith himself is regarded as the ‘Father of International Tax’ in India and is a ‘true pioneer’ in the field of International Tax Law. In the year 2023, for his contribution to the jurisprudence of international tax in India, Amity University awarded him the Honorary Doctorate degree. He was also a director on the board of the Singapore International Arbitration Centre (2011-2019).

 

Parul Jain Head - International Tax Practice Nishith Desai Associates

Parul Jain heads the International Tax and Fund Formation Practices at Nishith Desai Associates. She focuses on international taxation, cross-border transactions and fund formation practice areas including cross-border investments and group reorganization strategies, M&A transactions and venture capital/private equity funding structures. Parul is particularly adept in advising on cross-border issues arising from investments in India. She has assisted promoter groups in re-organizing their business structures. She has also worked with technology companies in advising them on matters involving digital taxation. She was the India Branch co-reporter for the subject “Taxation and Fundamental Rights: Taxpayers’ Procedural Rights in a Globalised World” for the IFA 2015 Basel Congress. She was also the Secretary to the panel on “Indirect Transfer of Assets” for the IFA 2014 Mumbai Congress and to the panel on “Tax Treaty Override” for the IFA 2019 London Congress.

Parul has been acknowledged by ITR World Tax as a 'Highly Regarded Tax Practitioner' and 'Women in Tax Leader' for the year 2024, as well as consecutively for several years. Additionally, she has been included in The Legal500 and Chambers & Partners international directories as a recommended lawyer for tax practice in India for the year 2025.

 

Ipsita Agarwalla Leader - International Tax Practice Nishith Desai Associates

Ipsita has over 5 years of experience in international taxation, M&A and fund formation. She is experienced in advising several clients on domestic M&A transactions and restructurings, inbound investments and repatriation, private equity transactions. She frequently advises on tax issues to several technology companies on tax and structuring issues, from an international tax and GST perspective including on upcoming technologies and digital products such as block-chain, crypto, non-fungible tokens and gaming. She is passionate regarding the social finance and impact investment space. She has assisted in the launch of one of India’s first-of-a-kind, USD 14.4 million Skill Impact Bond. She is also a member of the funds practice at Nishith Desai Associates where she advices on funds structuring and documentation of funds (domestic including GIFT City funds and offshore funds). She is also involved in advising various private equity clients with respect to their carry structures. She is extensively involved in the firms’ effort on identifying new opportunities and leveraging the new international financial services centre at GIFT City, Gujarat. She also writes regularly on contemporary international tax issues and has been involved with several initiatives within the firm, particularly for taxation of financial transactions and digital taxation.