India to Define Minimum Stake in Joint Ventures

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Apr. 9 – The Indian government is set to make a clarification to the country’s foreign investment laws, with specific attention to joint venture provisions.

Currently, there is no definition of a minimum stake in a joint venture for it to be classified as such; a situation that has sometimes led to a bare minimum of equity being held by a partner in order to circumnavigate some regulations over tax treatment.

The expected definition of a joint venture under a new draft of the consolidated FDI policy will raise the minimum level of investment each party must take to 25 percent. The policy is expected to become law as soon as the Indian Department of Industrial Policy and Promotion – a branch of the Commerce Ministry – has appointed its new secretary.

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in India. For more information, please contact india@dezshira.com, visit www.dezshira.com, or download the firm’s brochure here.

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