3 minute read 17 Apr 2024
Overseas investment strategies

How Indian firms leverage global expertise for outbound investments

By EY India

Multidisciplinary professional services organization

3 minute read 17 Apr 2024
Related topics Tax Global trade

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  • India abroad: navigating the global landscape for overseas investment

Rapid regulatory shifts necessitate local and tax expertise for sound overseas investments.

Over the last few years, there have been many policy changes and other developments that can be leveraged upon as businesses invest overseas, such as routing investments through the Gift City and leveraging on its liberal exchange control regulations and progressive tax regime; new ODI policy of the Reserve Bank of India; and increase in investment limits for public sector companies.  All these changes provide businesses with more flexibility in planning their overseas investments.

Overseas investment that is planned well with proper research can help create value and minimize risks. Some of the questions to consider while investing in a new jurisdiction are:

  • Investment protection: Is there a BIT treaty with the country in question and does it protect your investment
  • Local regulatory requirements: Are there any product related quality standards that you need to be aware of? Are there licensing or other requirements to be complied with?
  • Investment incentives: What are the investment incentives and what are the risks that the incentives may not be availed? What will be the impact of BEPS Pillar two and whether the benefit of incentives is real? Is there a possibility of double taxation?
  • Routing investment: Should the investment be made directly in the country or routed through a jurisdiction with whom India has a favorable tax treaty?
  • Permanent establishment: Under the local laws, how will the tax authorities make a determination of attributable profits
  • Transfer pricing: Depending on the nature of business relationship between the Indian parent and the overseas subsidiary, what will be the impact of transfer pricing regulations on business transactions
  • Environmental issues: What are the current environmental laws and how are they expected to change? Are your products and proposed operations in line with local requirements? 

Keeping all the above in view, EY has brought out the report, “India Abroad: Navigating the global landscape of overseas investments”. The report discusses some of the regulatory and tax issues that investors should consider while investing. We hope that you enjoy reading the report.

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How Indian firms leverage global expertise for outbound investments

Given the rapidly changing regulatory environment and policies, it is crucial to understand the local frameworks, cross border tax and regulatory issues to take well-informed decisions while investing overseas.

Summary

As the Indian economy grows and businesses become more competitive globally, there's a rising trend of Indian companies investing in foreign markets. This is driven by the need to diversify into new markets, serve the Indian diaspora worldwide, integrate into global supply chains, leverage cost advantages, access resources, acquire technology and brands, diversify risks, and access capital for expansion. These investments aim to create value and strengthen India's position in the global business landscape.

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By EY India

Multidisciplinary professional services organization

Related topics Tax Global trade