Externalization is the strategy of incorporating holding
companies in offshore jurisdictions for tax optimization and
operational stability.
With India's growth story gaining significant traction in
the international marketplace, the prospect of Indian entities
setting up offshore holding companies, especially in the e-commerce
sector, has become increasingly alluring considering challenges
associated with India's complex tax and regulatory regimes. The
allure is further augmented by the ease of operating from more
business-friendly jurisdictions and the possibility of attracting
financing overseas.
Advantages
One of the major triggers of externalization has been the
uncertainty in the current Indian tax regime that has been bought
about by ambiguities pertaining to the application of general
anti-avoidance rules as well as moves such as the government's
attempts to apply retrospective taxation on indirect transfers of
Indian assets. Further, the high rates of
