India, Saudi Arabia try to sort out joint fund irritants
NEW DELHI: India and Saudi Arabia are exploring ways to overcome the issue of exemption from capital gains tax on the proposed $750-million joint fund to facilitate investments into the Indian infrastructure sector.
“Unfortunately, we have not been able to move forward on our bilateral fund with Saudi Arabia due to clarifications that are still required on taxation,” Anil Wadhwa, Secretary (East), Ministry of External Affairs said at the India-Saudi Arabia Business Council meeting here.
The fund, announced during former Prime Minister Manmohan Singh’s visit to Riyadh in 2010, is yet to be operationalised as Saudi Arabia wants investments made from the fund to be exempt from capital gains tax in India.
The fund will be focussed on channelising Saudi investments into Indian infrastructure projects and promoting joint exploration and production of hydrocarbons.
“Basically, the issue is exemption from capital gains tax. If an exception is made, then you have to make an exception for all the funds. So, it’s a policy decision,” Wadhwa said.
“We will go forward in a different framework. We are exploring possibilities on how to overcome that and looking at it very seriously.”
Saud Mohammed Alsati, Ambassador of the Kingdom of Saudi Arabia to India, told PTI: “We need to work on tax exemptions for the fund… We are looking at the possibility of exempting the fund’s activities and profits here.
Alsati said one of the options could be to establish the holding company for the fund in an overseas tax haven like Singapore. The Ambassador termed the anti-dumping duty on some Saudi companies as a “hindrance” in expansion in India.
Besides, Wadhwa pointed out that India looks at Saudi Arabia as one of the key interlocutors in the Gulf region.
Noting that bilateral trade for 2014-15 had seen a decline to $39.4 billion, probably due to the reduction in global oil prices, he suggested: “We need to diversify our trade relations and also expand our trade basket.”
The secretary also spoke of efforts to make policies more stable, transparent and provide a level-playing field to both domestic and foreign investors.