Budget 2018: Tax loophole plugged for corporate mergers and amalgamations

This, however, would not affect the merger between Idea Cellular and Vodafone India as both companies were making losses

The Union Budget for 2018-19 has proposed to tax all mergers and amalgamations in which a company with higher accumulated profit merges with a company with lower profits, or with a company that made losses, and reduced capital to avoid paying dividend distribution tax (DDT).

The move assumes significance as companies, mainly multinationals and the unlisted ones, announced mergers in the past few years to escape the liability of paying tax on distributed profits in India.

According to tax experts, this will impact all mergers — for listed as well as unlisted companies — that were announced in the past few years,