Risk & Economy » Tax » Vodafone seeks arbitration over Indian tax dispute

VODAFONE is to seek international arbitration in a bid to resolve an historic dispute with the Indian government.

The dispute is rooted in Vodafone’s acquisition of Hutchison Whampoa’s Indian mobile assets for $11.2bn (£6.5bn). The Indian authorities had argued the deal was tax-liable in India.

New Dehli claims the telecoms network owes it around $2.2bn in capital gains tax from the deal, something Vodafone contests.

The government later changed laws that year to allow firms to be taxed retrospectively.

That development was widely criticised by investors, including Vodafone, and caused great concern among many foreign firms looking to enter India.

Vodafone’s Dutch subsidiary acquired a 67% stake in CGP Investments, a Cayman Islands-registered company which held the Indian telecom assets of Hutchison in May 2007.

As such, Vodafone has long claimed that the deal was not subject to any taxes in India as the assets were held by a firm based in the Cayman Islands.