Walmart to tap taxman
New Delhi: Walmart will approach the income tax department to find out its withholding tax liability, the US-based retailer has said. The statement follows comments by income tax officials that the Indian government expects Walmart to pay withholding tax within a fortnight of closing its $16-billion deal to buy a 77 per cent stake in Indian e-commerce retailer Flipkart.
"We take seriously our legal obligations, including the payment of taxes to governments where we operate. We will continue to work with Indian tax authorities to respond to their inquiries," Walmart said in a statement.
Witholding tax is the tax deducted at source for any taxable payments made to another party.
Officials said Flipkart had already submitted a copy of the share purchase agreement with the tax department. SoftBank, Tiger Global, Accel Partners and Naspers were the major foreign investors in Flipkart.
Revenue officials said the buy-out transfer amount would be taxable based on the indirect transfer-related provisions under Section 9(1)(i) of the I-T Act brought in 2012, which states that income deemed to accrue or arise to non-residents directly or indirectly through the transfer of a capital asset situated in India is to be taxed in India with retrospective effect from April 1, 1962.
This came about after a Supreme Court judgment on the issue four years back struck down an earlier Bombay high court judgment upholding a tax demand for $11.2 billion on a deal struck at an offshore tax haven between Vodafone International Holdings and Hong Kong-based Hutchison Whampoa, while selling the Indian arm of Hutch to Vodafone in 2007.
India's finance ministry stuck to its demand and brought the retrospective amendment which clarifies that the income tax laws of 1962 meant to tax any deal where the asset underlying the sale or purchase was in India, even if the deal is struck abroad.