US automaker Tesla has chosen the tax-friendly jurisdiction of the Netherlands to route its India investment. Tesla Motors Amsterdam is the parent company for Tesla Motors and Energy, India, the company’s incorporation documents showed.
This corporate structure in India would offer Tesla tax benefits related to capital gains and dividend payments, say experts.
Also, Tesla’s choice is an exception to the general trend in the auto industry. MG Motors entered India in 2017 invested via China, which is also the home jurisdiction for its parent company SAIC Motors. Similarly, India’s investments in KIA Motors came from South Korea, which is also the corporate home of KIA Corp. A mailed query sent to Tesla remained unanswered.
Tesla is registered in California, and Tesla Motors, the Netherlands, is its subsidiary. Tax experts said the Netherlands has been one of the top choices for US-based companies since it offers favorable tax rates and has a strong intellectual property (IP) protection framework.
“With the amendment of India’s tax treaties with Mauritius and Singapore, there are hardly any choices for getting capital gains tax exemption on FDI transactions,” said Rajesh Gandhi, partner, Deloitte India. “The India-Netherlands treaty stands out because it exempts capital gains from tax where India shares are sold by the Dutch company to a non-Indian buyer.”
Even the rates for dividend taxes and withholding taxes are lower if an investor chooses to come via the Netherlands, say, tax experts.