New Delhi: US retail giant Walmart on Friday said it had complied with tax obligations of its $16 billion acquisition of India’s largest online retailer Flipkart, without specifying the quantum of taxes paid.

The tax authorities had set September 7 as the due date for depositing a withholding tax on the deal amount Walmart paid to shareholders of Flipkart. Withholding tax, or retention tax, is an income tax to be paid to the government by payer of the income rather than by the recipient of the income. The tax is thus withheld or deducted from the income due to the recipient. In case of the Walmart-Flipkart deal, the withholding tax pertains to the capital gains made by Flipkart shareholders.

“We take our legal obligations seriously, including paying taxes to governments where we operate. Following our Flipkart investment, we have now completed our tax withholding obligations under the guidance of the Indian tax authorities," a Walmart spokesperson said. The company, however, did not disclose the tax amount deposited with I-T authorities at the time of publication of the article.

US-based retail giant Walmart Inc completed the acquisition of 77% stake in Flipkart for around $16 billion in the middle of August. According to the provisions of the Income Tax law, Walmart has to deduct withholding tax on payments made to sellers and deposit it with Indian authorities on the seventh day of the subsequent month, which in this case is 7 September. Of the 44 shareholders of Flipkart who sold stake to Walmart, the significant ones include SoftBank, Naspers, venture fund Accel Partners and eBay. Co-founder Sachin Bansal also sold his stake to the US retail major.

According to Indian tax laws, long-term capital gains tax is levied at 20% for shares sold by foreign investors after 24 months of purchase. However, the law also provides for a taxpayer to pay taxes at a lower or nil rate if he is eligible for benefits under the Double Taxation Avoidance Agreement between India and the country from where the investment was routed. The I-T department has been reviewing Section 9 (1) of the I-T Act, which deals with indirect transfer provisions, to see if the benefits under the bilateral tax treaties with countries such as Singapore and Mauritius, could be made available for foreign investors selling stakes to Walmart.

Singapore-registered Flipkart Pvt Ltd holds majority stake in Flipkart India.

According to sources in the department, the tax officers would now look into taxes deposited by Walmart for every shareholder who sold shares in Flipkart. In case of any discrepancy, the department would write to Walmart seeking its response for failing to deposit taxes.

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