Articles 22nd Jul 2024
The Indian startup ecosystem is undergoing a significant transformation, with reverse flipping gaining prominence. The Economic Survey 2022-23 highlighted favorable conditions for startups to relocate to India, supported by government initiatives. Founders are increasingly recognizing India’s growth potential, coupled with global market challenges and ambitions for IPOs, leading to a focus on long-term stability in the home jurisdiction.
The International Financial Services Centre (IFSC) has been a cornerstone of India’s ambition to become a global financial powerhouse, with a key objective to ‘Onshore the Offshore.’ As per a recent trend, startups are evaluating relocation of offshore holding companies to the IFSC through various methods. These include transferring shares of an Indian entity from the offshore holding company to the IFSC holding company, merging the offshore holding company into the IFSC, share swap, and re-domiciling the offshore holding company to the IFSC. The IFSC Expert committee made various recommendations to facilitate reverse flipping of Indian startups including permitting holding company structures in IFSC. Implementation of these recommendations is keenly awaited.
As the government prepares its fiscal plan for FY 2024-25, there is keen anticipation of certain fiscal measures being introduced to enhance tax certainty and facilitate reverse flipping. Certain key expectations regarding expected fiscal amendments to facilitate/fast track such relocation possibilities of startups are as under:
By extending tax benefits and rationalizing provisions to avoid unintended tax consequences for startups flipping back, the Union Budget 2024 has the potential to create significant opportunities. If these expectations are realized, reverse flipping through the IFSC may become a reality.
We trust you will find this an interesting read. For any queries or comments on this update, please feel free to contact us at insights@elp-in.com or write to our authors:
Rahul Charkha, Partner, Email – rahulcharkha@elp-in.com
Arpita Choudhary, Principal Associate, Email – arpitachoudhary@elp-in.com
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