NEW DELHI: The Treasury has announced that non-resident investments in private Indian startups from 21 countries including the US, UK, Germany and France will be exempt from angel tax.
However, the list excludes investments from key countries such as Singapore, the Netherlands and Mauritius. “It is noteworthy that many popular jurisdictions such as Singapore, Mauritius, Cayman, Netherlands, Cyprus and United Arab Emirates are not included in the list of reported countries and therefore investments from funds registered in these countries are not excluded. “Singapore, Mauritius, the United Arab Emirates and the Netherlands were among the top five countries with the highest FDI inflows to India in 2022. The decision not to exempt funds from these countries will limit the usefulness of this notice for Indian startups,” said Vaibhav Gupta, partner at Dhruva Advisor.
In the budget, the government had expanded the scope of the angel tax to include investments by foreign investors. Startups that are already having difficulties surviving the financing winter have applied for an exemption for certain investor groups abroad. Experts had previously stated that startups facing angel tax notices would have to pay 25% of the investment raised as tax and double that as a penalty for violating the exemption terms.
The Central Direct Tax Office (CBDT) on May 24 notified investor groups that would not be subject to the angel tax provision. Excluded entities include those registered with Sebi as a Category I FPI, endowment funds, pension funds and broad-based pooled investment vehicles domiciled in 21 designated countries including the US, UK, Australia, Germany and Spain.
Late last week, the government proposed a series of tax changes for angel investors in unlisted companies, including expanding the scope of valuation methods.
However, the list excludes investments from key countries such as Singapore, the Netherlands and Mauritius. “It is noteworthy that many popular jurisdictions such as Singapore, Mauritius, Cayman, Netherlands, Cyprus and United Arab Emirates are not included in the list of reported countries and therefore investments from funds registered in these countries are not excluded. “Singapore, Mauritius, the United Arab Emirates and the Netherlands were among the top five countries with the highest FDI inflows to India in 2022. The decision not to exempt funds from these countries will limit the usefulness of this notice for Indian startups,” said Vaibhav Gupta, partner at Dhruva Advisor.
In the budget, the government had expanded the scope of the angel tax to include investments by foreign investors. Startups that are already having difficulties surviving the financing winter have applied for an exemption for certain investor groups abroad. Experts had previously stated that startups facing angel tax notices would have to pay 25% of the investment raised as tax and double that as a penalty for violating the exemption terms.
The Central Direct Tax Office (CBDT) on May 24 notified investor groups that would not be subject to the angel tax provision. Excluded entities include those registered with Sebi as a Category I FPI, endowment funds, pension funds and broad-based pooled investment vehicles domiciled in 21 designated countries including the US, UK, Australia, Germany and Spain.
Late last week, the government proposed a series of tax changes for angel investors in unlisted companies, including expanding the scope of valuation methods.
