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Recently, Elon Musk announced entry of Tesla Motors into the Indian market. The American automaker has been setting the EV segment alight with a slew of new model introductions in the last decade. After much contemplation, it has decided to enter the fast-growing Indian market. There have been rumours of a tie-up between Tesla and Tata Motors but nothing concrete has surfaced so far. Now, reports are streaming in of Tesla investing in the Indian market through its Holland subsidiary. The reason for choosing its Dutch arm is because of the country’s status as a tax-haven. This was confirmed in a recent report published in the Economic Times.
As per the company’s incorporation documents, Tesla Motors Amsterdam is the parent company for Tesla Motors and Energy, India. According to the experts quoted in the report, the corporate structure in India would offer Tesla tax benefits related to capital gains and dividend payments. This is a departure from the other foreign automaker's strategy regarding investment in the country. For example, MG Motor at its time of entry in 2017 invested through China. It is the home of its parent company SAIC Motors. Even Kia Motors invested money through South Korea. Similarly, it is the home of the parent company KIA Corp.
Tesla is registered in California while Tesla Motors is based out of the Netherlands, is its subsidiary. Tesla earned over $1.5 billion worth revenues from its Dutch arm in the financial year 2019 while the brand’s total revenue stood at $24 billion. Tesla had set-up some European subsidiaries through its Netherlands wing. The Netherlands has emerged as one of the best countries to set-up base for the American companies. The reason being that it offers good tax rates and strong intellectual property (IP) protection. The Netherlands has become an investment gateway option for companies who want to invest in the Indian market. Earlier, Mauritius and Singapore were the favoured countries for the firms till the Indian government revised tax treaties in FY 2016. Till the revision of the tax treaties, both countries had the full advantage of capital gains tax exemptions in India.
Source: Economic Times