Panama Papers (Legal Position of India):
Politicians, Criminals and the Rogue industry that hides their cash. The Papers investigate and leaks about all offshore entities details. Leaked documents contain detail financial information of many individuals, public officials and corporate services etc.
Documents were created by Panamanian law firm and provided by MOSSACK FONSECA {Corporate Service}.
Entities:
Organization / Company.
Offshore:
Variety of foreign based entities. It identifies any item i.e., located outside of one’s national boundaries. It is used to describe foreign banks, corporation, investments & deposits.
Offshore entities:
Corporation / Entity formed in a foreign country with principals of it. It can only operate outside of its country of formation.
Panama leaks / Panama Papers -
In this we have hundreds of individuals (over 500 Indians approx.) & thousands of individuals across the world have setup offshore entities. These entities set up at various tax havens could be British Virgin Islands it could be seashells it could be panama it could be any other or know somewhere in several others.
Legal position in India where Indian resident individuals allowed to set up companies abroad for a very long time we didn’t allow convertibility of the rupee i.e. that you can’t convert the rupee into dollars and take them outside.
In 2014 February for the 1st time RBI (Reserve Bank India) announced a scheme called LRS (Liberalized Remittance Scheme). Where they allowed every resident individual to take 25K dollars outside India i.e., Purpose may be Company, Gift, Property, Shares, Donation in Overseas.
In 2016, 25,000 dollars limit was gradually raised over a period of time and today it is about 2,50,000 dollars every year. So that every individual can take 2,50,000 dollars legally outside India whatever he want/ whatever purposes. Individuals are all allowed to make portfolio investment but the RBI kept silent / kept quiet.
“RBL did not specifically allow resident Indians to setup companies aboard until 2013”. “Some individuals interpreted the LRS to mean that offshore entities can be setup."
Some loops in pervious scheme RBI met in 2007-2008 with lot of people and said that you can’t do direct investment by setting up own companies in overseas since there was confusion in the market RBI actually came out with some answers on September 17 2010.
In 2010 RBI gave Clarification – “The LRS allows for buying shares, but specifically prohibits setting up companies aboard by individuals.
After these many individuals sought to take a different view then Chartered Accountants game give them a hyper technical view that acquiring companies is not the same as setting up companies.
Then the game starts “We can’t incorporate companies aboard but you can take over an existing company so there are many players in the overseas market there at least MOSSACK FONSECA -LAW FIRM is one of big incorporators which works like factory they keep on registering companies and anybody can buy come to them by a company and then you know acquire shares in it.” But it is not really buying of shares into these companies they were basically offering companies. So, RBI was a clearly said that you can’t buy you can’t incorporate and you can’t have a company in aboard.
In 2013 August after many questions raised from many individuals & finally RBI allows resident Indians to invest directly in JV’s (Joint Venture) & overseas subsidiaries through the ODI (Overseas direct investment) route which is different form the LRS. According to ODI you could a resident individual could go and set up a 100% subsidiary also in a joint venture company.
“Individuals who had set up companies oversea prior to august 2013 would have technically violated the rules on LRS”. They are violated FEMA (Foreign Exchange Management Act) laws who setup companies even ahead of 2004,2004,2013."
Finally, many people corporates call as “Tax saving plan” i.e. setting up incorporated companies with shell of MF and acquiring shares and using as funds. But
Today across world including G20 countries it is seen as “Tax avoidance”. Income tax department and tax authorities across the world do not look at it as tax planning they look at a stack of “Tax avoidance not Tax planning”.
There is also a problem i.e., SECRECY of the owners.
Thank you.
G20 Countries – Group of 20 Countries: India, Argentina, Australia, Brazil, Canada, China, France, Germany, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom and United States of America.
