Last week it was revealed that Tesla had incorporated an Indian entity. It was also revealed that Tesla is setting up base in Bangalore, however, now it has been revealed that Elon Musk's company has routed the investment in the Indian venture via Amsterdam. Tesla Motors Amsterdam is the parent of Tesla India Motors and Energy India.
Tesla India Motors and Energy Private Limited has been incorporated in Lavelle Road Bangalore which Rs 15 lakhs as authored capital and Rs 1 lakh paid-up capital.
As per a Business Insider India report Sridhar Ramachandran, the tax partner at Grant Thornton Bharat said that that the tax benefits related to capital gains and dividends payments would give Tesla benefits. He also added that India and Netherlands have a good treaty for coaxial gains exemption for lower withholding tax on diffident and lower withholding on interest.
This is an interesting move by Tesla as companies like MG Motors or Kia motors have done the investment via their home countries which is China and South Korea respectively. For Tesla to do the same, it would've needed to pipe the money via the US, but it has chosen Holland.
According to Ramachandran, the Indo-Netherlands treaty is at the core of the move as it has never been renegotiated which has "stood the test of time."
Deloitte India's partner Rajesh Gandhi also tells Business Insider that under the "agreement for the avoidance of double taxation and prevention of fiscal evasion" between the two countries, dutch companies get an exemption from Capital gains when shares in Indian companies are sold subject to some caveats.
It should be noted that even though this treaty hasn't been renegotiated, there were similar treaties between with Mauritius and Singapore which were renegotiated in 2016 and 2019.
"Netherlands has a strong treaty network (including a good treaty with the USA) and its domestic law also favours multinational corporations. The India Netherlands treaty also provides for a lower withholding tax rate on dividends that a Dutch company may receive from an Indian company," Ramachandran added.
He also said that any changes to the domestic Indian tax law may only improve the current position, which would give a lower withholding tax rate under domestic law itself.
Telsa is expected to be launching the Model 3 in India and apart from this also expected to open an R&D center in South India.