Telecom firms queue up for tax consultations with India

Even as the income tax (I-T) department has slapped a notice on Finnish mobile handset giant Nokia Co for alleged unpaid taxes of Rs2,008 crore, a report says that multinational firms are lining up for consultations with Indian tax authorities on the valuation of proposed cross-border transactions.

They do not wish to be caught in unexpected tax webs like the demands received by Shell and Vodafone recently, The Indian Express says citing sources.

As many as 150 large telecom transactions are likely to be entered into in 2014-15 with the overseas parents or associates of Indian operators.

These include deals on royalty payments, research and development contracts, software services, and management services, according to the report.

Companies in the automobile, pharmaceutical and semiconductor manufacturing sectors, as well as software and companies, have sought consultations with the tax department.

The guidelines for multinational corporations to consult with taxmen were issued in August last year.

Under these, anonymous pre-filings could be made on a proposed transaction to get an idea of the potential tax liability without being bound by the authorities' ruling on the planned deal.

If MNCs find the tax department's assessment of the transaction value and the tax liability acceptable, they could enter into an 'advanced pricing agreement' under which the department will not question the valuation for five years.

Many of the pre-filings are expected to be converted to APAs, according to the report.