Transaction Tax India

Transaction Tax India

Contents Who we are Our service offerings Methodology About Ernst & Young

1. Who we are a. Who we are b. The challenges we meet Transaction Tax India 3

a. Who we are A seamless team of professionals with multi-disciplinary skill sets consistently providing high-quality client services Corporate reorganization Group restructuring Acquisition structuring Outbound structuring Promoter stake enhancement and delisting Private equity/ Venture capital advisory Financial structuring Divestment advisory Tax due diligence 4 Transaction Tax India

b. The challenges we meet Our comprehensive analysis encapsulates a wide gamut of tax and regulatory aspects... Tax Accounting Financial statement impact analysis Advice on accounting issues arising due to transactions Direct and indirect tax structuring to minimize tax costs Advisory and implementation support Practical, implementable advice with a commercial business mindset Stamp duty Computation and analysis of exposure Transaction structuring to minimize costs Foreign exchange/fdi Structuring to meet regulatory norms Assistance in seeking approvals Corporate laws Corporate reorganization laws SEBI /Capital market perspective Competition/Intellectual property law broad implications Industry- Highlighting transaction- Transaction Tax India 5

2. Our service offerings a. Corporate reorganization b. Group restructuring c. Acquisition structuring d. Outbound structuring e. Promoters stake enhancement and delisting f. Private equity/venture capital advisory g. Financial structuring h. Divestment advisory i. Tax due diligence 6 Transaction Tax India

a. Corporate reorganization Expertise and experience in: Mergers/Amalgamation Demergers/Spin-offs Subsidiarization Joint ventures Business/Asset sale We assist in: Designing alternative effective tax and regulatory structures Meeting commercial objectives within regulatory constraints Reviewing transaction documentation Liaising with various stakeholders Advising on integration Resolving post-transaction issues Transaction Tax India 7

b. Group restructuring Core competence business Structure in sync with group s plans Enhancement/ Unlocking of shareholder value Holding structure to capture value of operating companies The unique challenges we meet Structure amenable to raising funds (in India and/ or overseas) Wealth management and succession planning for stakeholders Collapse of complex, multi-tier, cross holding structure 8 Transaction Tax India

c. Acquisition structuring Advise on domestic and inbound acquisition structuring for strategic acquirers directly or through appropriate intermediary jurisdictions Withholding of tax on dividends, interest, royalties, etc. Tax treaty network of intermediary jurisdiction Capital gains taxation on future divestment or exit Acquisition structuring Capital market implications Exchange control implications Funding options We design structures, bearing in mind tax, regulatory and relevant commercial aspects and their implications. Transaction Tax India 9

d. Outbound structuring Evaluation of alternative entity, operating and investment structures of overseas operations and investments from international and Indian tax and regulatory perspective, including inter alia: Choosing entity format for overseas operations opportunities through the use of such entities and instruments Providing advise on availing foreign tax credits Leveraging targets through debt push-down We assist in: perspective with regard to the possibility of achieving a step up of underlying assets, preservation of tax attributes, taxability in the hands of the vendor and migration of intangibles to tax-friendly jurisdictions 10 Transaction Tax India

e. Promoters stake enhancement and delisting Conceptualization and evaluation of alternatives for wealth enhancement of various stakeholders encompassing: Consolidation of stake and rationalization of ownership structure Unlocking value in an appropriate jurisdiction Wealth management and succession planning Ensuring timelines are adhered to Identifying regulatory pressure points Optimizing tax and other transaction costs Delisting is characterized by certain distinct challenges. We assist our clients to formulate strategies for their delisting process. We follow the following broad methodology: Formulating strategies based on preferred alternatives Laying down implementation roadmap Providing assistance on implementation Evaluating alternatives Identifying alternatives Reaching an understanding of the ultimate objectives Transaction Tax India 11

f. Private equity/venture capital advisory We are aware that private equity (PE) and venture capital investors are driven by intricate considerations, which are critical to the success of transaction, while making investments. We adopt a two-fold transaction strategy in this scenario. Transaction strategy Transaction structuring Investment and exit structuring through alternative mechanisms (IPO, MBO, LBO, stake sale, etc.) tax and exchange control aspects Comprehensive tax due diligence Review of relevant transaction documentation from a tax and regulatory perspective while keeping commercial objectives in mind Investee considerations Considerations relating to PEs during the holding period: Investee restructuring for shareholder value enhancement/unlocking Acquisition/Divestment by investee Relevant tax and exchange control implications while structuring payouts Capital market perspective 12 Transaction Tax India

g. Financial structuring Fund raising Capital structuring Extensive analysis of each transaction, enabling conceptualization, selection and implementation of options from a tax and regulatory perspective Structuring of transactions for entities in/levels at which funds should be raised or repatriated IPO advisory for Indian/overseas listing Instruments that should be used to raise or repatriate funds reduction, royalties and management fees Designing of appropriate capital structure Debt restructuring Transaction Tax India 13

h. Divestment advisory unique challenges Evaluating options demerger, business/asset disposal, stock sale, etc. Divestment advisory Analyzing and minimizing tax and regulatory implications: Capital gains Stamp duty Exchange control Capital market issues Comprehensive vendor due diligence evaluating existing structure and exit mechanics Implementation assistance 14 Transaction Tax India

i. Tax due diligence Tax due diligence is much more than a mere administrative process. It impacts every aspect of and is integral to a business transaction. In this regard, we offer direct as well as indirect tax due diligence services. Our focus areas include the following: Review of deferred tax 5 4 Review of compliance with tax withholding requirements Review of indirect tax positions/status 6 7 Review of compliance with various indirect taxes (service tax, customs, excise, VAT, etc.) Review of tax position adopted during prior years 1 2 3 tax incentives and government subsidies enjoyed by a company Review of adequacy of tax provision made Mitigate downside risk & identify opportunities for the acquirer Transaction Tax India 15

3. Methodology a. The transaction lifecycle b. Key differentiators c. Why choose Ernst & Young s Transaction Tax professionals? 16 Transaction Tax India

a. The transaction lifecycle About Transaction tax The successful completion of any transaction lifecycle is achieved through careful planning and implementation. Ernst & Young utilizes its vast experience in providing tax and regulatory services to successfully conduct and complete transactions in one location. Process Understanding objectives Transaction cost analysis Option analysis Transaction implementation Post transaction Integration Service offerings Obtaining a clear understanding of the goals/ objectives a transaction intends to accomplish Understanding the business, strategic plans, growth imperatives, organization/ investment structure, etc., of an organization Taking into consideration a company s overall risk appetite and its ability to manage/ handle tax and regulatory risk Assisting in formulating strategies Identifying tax, regulatory and stamp duty exposures, and providing advise on their implications Examining current tax holidays/ and exploring the possibility of their post-transaction continuity Reviewing constitutional documents, pending litigation, etc. Reviewing compliance with industry-/ regulations Examining alternative transaction structures from a tax, stamp duty, company law, capital market, foreign exchange/ FDI, commercial objectives, etc., perspective Conducting comparative analysis of each alternative in terms of time, costs, ease of implementation, and key tax, regulatory and commercial considerations Approaching the relevant regulatory authorities and coordinating with various external agencies for assistance in smooth implementation Monitoring ongoing acquisition issues and identifying the required postacquisition steps Ensuring adequate documentation to protect potential tax assets Ensuring that time frames for implementation are complied with Providing advise on postimplementation compliance required to ensure that objectives are met Ensuring integration of tax and regulatory practices of the entities involved Advising on minimization of post-transaction costs, and ongoing regulatory and compliance issues conceptualization Implementation project management Transaction Tax India 17

b. Key differentiators Approach Multi-disciplinary functionality combined with client-centric approach Innovative and implementable solutions provided through solution-driven approach Single point of contact initiated for all tax and regulatory services Critical mass A focused team with an optimal mix of professionals who are dedicated to the Transaction Tax practice and share knowledge Transactions experience Proven capability in planning, execution and service delivery Global network Seamless access to our Global Tax network 18 Transaction Tax India

c. Why choose Ernst & Young s Transaction Tax professionals? Our experienced teams, with strong PE and corporate credentials, can provide proactive advice, e.g., on anticipation of potential pitfalls and guidance on key issues Our access to a global network of transaction specialists to balance our global experience with detailed knowledge of domestic market + 0 # serving clients needs Our successful teaming liaising with and creating teams that include specialists Our commitment to deals, bringing our knowledge of the acquisition process to bear throughout the entire transaction life cycle Transaction Tax India 19

4. About Ernst & Young a. A global organization b. The leading professional service brand in India c. 20 Transaction Tax India

a. A global organization Ernst & Young is a global, multidisciplinary professional services organization. It is built on the knowledge base of 152,000 personnel in 750 locations spread across 140 countries. It has strong national partnerships that focus on common goals and governance with a single global strategy, code of practice and communications platform. Our integrity and professional competence form the cornerstones of our global organization. Our consistent high standards of global execution are supported by standardized methodologies, technologies and governance. Strong coordination and communication facilitate continuity in service delivery. Ernst & Young is a leading provider of assurance/advisory, tax and transaction advisory services to international clients in a wide range of industries, as well as to government agencies and private individuals. Our industry focus includes provision of services to our clients. Chandigarh Delhi Gurgaon Noida Ahmedabad Kolkata Mumbai Pune Hyderabad Bengaluru Chennai Kochi People 6,600 + employees Partner 198 10 Transaction Tax India 21

b. The leading professional services brand in India Execution Brand Relationships Market leadership Reputation Share People Quality Growth Execution Ranked #1 for service, people, teams and relationships of industry and insight on business issues Ranked #1 for responsiveness quick to market with solutions Ranked #1 for global integration and promotion of entrepreneurship results for India, based on 109 interviews with CFOs, other C-suite companies, audit committees and senior management Operational excellence Account-centricity Shared values Global mindset 22 Transaction Tax India

c. in India 2010 Ranked No. 1 on deal count 2009 Ranked No. 1 in value and on deal count 2008 Ranked No. 1 in deal count 2007 Ranked No. 1 in deal count 2006 Ranked No. 1 in deal count 2005 Ranked No. 1 in deal count 2004 Ranked No. 1 in value and deal count 2003 Ranked No.1 on deal count 2002 Ranked No. 1 on deal count Source: Bloomberg league tables Note: Includes merger, acquisition, divestiture, selftenders (excludes buy back transactions ) Transaction Tax India 23

Notes 24 Transaction Tax India

Notes Transaction Tax India 25

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Ernst & Young Pvt. Ltd. Assurance Tax Transactions Advisory About Ernst & Young Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 152,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Ernst & Young Pvt. Ltd. is one of the Indian client serving member firms of EYGM Limited. For more information about our organization, please visit www.ey.com. Ernst & Young Pvt. Ltd. is a company registered under the Companies Act, 1956 having its registered office at 22 Camac Street, 3rd Floor, Block C, Kolkata - 700016 2011 Ernst & Young Pvt. Ltd. All Rights Reserved. This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor. www.ey.com/india EYIN1111-122 (India).