PhonePe investors paid ₹8,000 crore in taxes to make India their home

“If you want to transfer domicile from any other market to India, it is treated as a capital gain event… Hence, you will have to make a fresh market assessment and pay tax on the delta,” the corporation said. said PhonePe chief technology officer Rahul Chari in a YouTube conversation on Wednesday.

Walmart Inc. And Tencent-backed PhonePe also loses its chance to offset accumulated losses of $900 million against future profits, as local tax authorities treat the change of domicile as a restructuring event.

In addition, the corporation said that the employees will also start afresh with their Employee Stock Option (ESOP) vesting period as per Indian laws. “The law in India says that if you migrate an Esop plan, you have to start all over again with a fresh cliff of one year,” said Nigam. period in India.

The company shifted its domicile to India in October as it wanted to list its stock in the domestic markets and create shareholder and ecosystem value locally, the corporation said, adding that PhonePe was determined to be a mature business. may face “shocks” as its “investors have a multi-decade outlook”.

The corporation also underlined that after PhonePe’s domicile shift, around 20 unicorn startups and their investors arrived with the intention of shifting their domicile back to India. However, the corporation did not disclose the names of the firms. Fintech unicorn raises $350 million from private equity firm General Atlantic at $12 billion valuation after PhonePe’s domicile shift. More investors, including Tiger Global, are expected to invest up to $1 billion in this round, which has earned it the tag of India’s most valuable fintech.

The company said in October that it plans to go public in 2023. However, things have changed a lot. For example, PhonePe was spun off from Flipkart in December. The latter had acquired PhonePe in 2016. The corporation explained that for the domicile shift, it had to align the board and shareholders of PhonePe as well as its largest shareholder Flipkart. He added that the demerger of PhonePe from Flipkart would help unlock more value and “give the company an opportunity to attract other investors more aligned to its business”.

The corporation did not provide an exact timeline for the initial public offering when Chary asked about it.

“Change of domicile is a rare occurrence in India as companies first set up in tax havens like Singapore or Mauritius. However, with the replacement of multilateral instruments with offsets and double tax treaties, tax havens are becoming unattractive as operating from there would be an additional cost,” said Atul Puri, director and co-founder of tax advisory firm SW India .

“As per the provisions of section 79 of the Income Tax Act 1961, if there is a change in the beneficial ownership of the shareholding by more than 50% as compared to the end of the year in which the loss was incurred,” said Rahul Charkha, partner, Economic Law Practice, the company Such loss will not be able to be carried forward and set off against profits of future years.Change of domicile restructured the ownership of PhonePe.