December 4, 2016
Vodafone has been ordered to pay up $2 billion (£1.4 billion) in capital gains tax by an Indian court.
Britain’s biggest mobile network provider is being billed by the Indian Income Tax Department after it acquired a 67% stake in Indian network provider Hutchinson Essar last year for $11 billion.
Indian authorities say Vodafone should have held back $2 billion of the $11 billion to pay for tax on the acquisition.
Vodafone has expanded into emerging markets across central Europe, Asia and Africa in recent years.
It says the Hutchinson Essar deal was completed at an offshore tax haven, meaning that the company is not liable to pay tax on the acquisition in India.
Vodafone has been given eight weeks to file a renewed appeal with the Indian Supreme Court in New Delhi. The company said it will be doing this.
A spokesperson for Vodafone said the company is ‘confident’ that a positive outcome will be reached in the end.
India is the fastest growing mobile phone market in the world, with ten million new mobile subscribers every month.
This makes Vodafone’s business in the country – which already has 56.7 million subscribers – one of its most lucrative assets.
India’s decision to pursue Vodafone for tax could put off foreign companies considering investment in India.
The landmark ruling also means that hundreds of UK-based companies with operations in India could be landed with large tax bills over the next few years.