Foreign Holding Structures for Indian Outbound Investments Brussels, 2 September 2008

Indian Group with Foreign Subs Indian Parent Company Europe Asia North America

Foreign Holding Company Objectives are: Tax efficient repatriation of profits Obtaining treaty benefits (e.g. royalties) Indian deferral planning Tax efficient financing of foreign operations Protection under Bilateral Investment Treaties Organizational and business reasons Regulatory reasons

Foreign Holding Company Example #1 Indian Parent Company Singapore Holding Company Dutch Holding Company NL Group Companies EU Group Companies US Group Companies

Foreign Holding Company Example #2 Indian Parent Company Mauritius Holding Company Singapore Holding Company Luxembourg Holding Company Asian Group Companies EU Group Companies

Ideal Holding Regime (1) No taxes on dividend income and capital gains Losses on participations deductible Financing expenses deductible No thin capitalization rules No withholding tax on dividends paid to holding company No withholding tax on repatriation of profits No capital tax/stamp duties

Ideal Holding Regime (2) No CFC rules No subject-to-tax requirements No holding period No non-resident taxation exposure Politically stable, no exchange controls or foreign ownership restrictions, good infrastructure Excellent international reputation The preferred system is simple, predictable, reliable and has a long lifetime expectancy

No Tax on Dividends DWHT in the source state Non-resident taxation in the source state Taxation in the jurisdiction of the holding company DWHT on distributions by the holding company

No Tax on Capital Gains Sale of shares in a subsidiary: Separate capital gains tax in sources state Non-resident taxation in the source state Taxation in the jurisdiction of the holding company Sale of shares in the holding company: Taxation in the jurisdiction of the shareholder

Financing Expenses Deductible Thin Capitalisation or Earning Stripping Rules Other Limitations

No CFC Rules CFC Rules (Anti) Passive Investment Rules

Ruling System Which jurisdictions offer protection to (potential) investors through the issuance of advance clearance?

No WHT on Interest and Royalties Under domestic law Reduced by Tax Treaties Through European Directives Opportunities for group financing activities and group licensing activities

Comparison Holding Regimes NL SIN MAU CYP UK LUX BEL        No taxes on dividends / capital gains        No subject to tax requirement        No exclusion of passive income        Losses on participations deductible        Financing expenses deductible        No holding period        No WHT on dividends paid        No capital tax/stamp duties        No CFC rules        Ruling system        No WHT on interest and royalties        No non-resident taxation rules

Possible Dutch Legal Entities Public Limited Company (naamloze vennootschap) Bearer shares or registered shares Minimum capital EUR 45,000 No mandatory transfer restrictions Mainly used for listed companies or regulated companies Private Limited Company (besloten vennootschap) Only registered shares Minimum capital EUR 18,000 Mandatory transfer restrictions Cooperation (coöperatie) Special form of an association No share capital, but membership rights At least two members

Some Legal Considerations Incorporation by notarial deed Necessity statement of no objection (timing!) Necessity information on ultimate beneficial owners Contribution in kind to be evidenced by confirmation accountant Contribution in cash to be confirmed by bank statement Pre incorporation liabilities Appointment of/representation by management board Timely disclosure of annual accounts (Interim) dividend distributions No foreign exchange controls No securities and credit supervisions for non listed companies

Dutch Flex BV: Towards a More Competitive Legal Form Expected implementation: 2009 Main Objectives: Decrease of mandatory law elements Increase flexibility Abolish or replace ineffective rules Reduce legal uncertainties Facilitate needs of national and international legal community

Dutch Flex BV: Towards a More Competitive Legal Form INTRODUCED minimum capital € 0,01 no bank statement or accountant statement required at incorporation or for contributions reduction convocation time GMS electronic convocation GMS non-voting shares ABOLISHED: mandatory share transfer restrictions freely distributable reserve test financial assistance prohibition number of votes linked to nominal value shareholder resolutions outside meeting to require unanimity