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[19946]
April 10, 2006
TO: ADVISER DISTRIBUTOR TAX ISSUES TASK FORCE No. 5-06
INTERNATIONAL MEMBERS No. 7-06
TAX MEMBERS No. 12-06
RE: ICI LETTER ON INDIA’S TAXATION OF U.S. MUTUAL FUND MANAGERS
The attached Institute letter to India’s Ministry of Finance addresses recent assertions by
Indian tax authorities that a mutual fund should withhold and remit tax in excess of 40% of the gross
management fee paid to its manager with respect to the mutual fund’s Indian securities. The letter
describes the U.S. mutual fund industry and the activities of U.S. mutual fund managers, including
investment in Indian securities.
The letter asserts that no Indian tax liability should arise, under either India’s domestic tax laws
or the U.S.-India treaty, when a U.S. mutual fund manager makes investment decisions in the U.S. for
U.S. mutual funds regarding Indian securities. The letter states that India’s attempt to tax payments by
U.S. mutual funds to U.S. mutual fund managers could have a negative effect on foreign institutional
investor willingness to invest in India. Any reduced investment in India could harm India’s economic
infrastructure and reduce access to capital, especially for small businesses.
Finally, the letter requests prompt guidance clarifying that U.S.-based mutual fund managers,
making portfolio investments in Indian companies on behalf of U.S. mutual funds, are not taxable in
India on the management services they provide to these mutual funds.
Lisa Robinson
Associate Counsel
Attachment (in .pdf format)
Note: Not all recipients receive the attachment. To obtain a copy of the attachment, please visit our members website
(http://members.ici.org) and search for memo 19946, or call the ICI Library at (202) 326-8304 and request the attachment
for memo 19946.