Since the early days of startups in India, companies have always considered whether to be based in Delaware/USA, Singapore, or India itself. Among the several reasons for doing so, the top ones cited are:
- To easily access overseas VC/PE capital
- To increase the likelihood that a US-based company (most likely an M&A candidate) will acquire the company
- US-Based IPOs May Bring Bigger Returns
As such, some Indian companies are trying to incorporate overseas. Let me be clear: none of the startups intend to take government taxation lightly. In fact, most startups are loss-making in their first few years and aren’t taxable. India loses in many ways in the long run when founders and companies move abroad.
Wealth Creation Opportunities for Indian Citizens via VC or IPO
Creating a tech ecosystem – Spin-offs, talent development and IP ownership all go offshore. Soft power such as SNS is owned by foreign countries
Tax on capital gains and GST on income
However, rather than solving the EODB problem, the system is moving towards making it harder for entrepreneurs to incorporate abroad, and in the process finding new loopholes. Rules such as “Indian nationals cannot become the first shareholder of a foreign entity, but may be able to prove that the capital originally invested was obtained abroad” are new to lawyers. Add to this complexities such as angel taxes, round-trip rules, and restrictions on investing in foreign companies. The reality is that legacy systems can only be changed incrementally, and while we admire their intent, it’s unfair to expect groundbreaking regulation to come.
A new approach is needed that starts with a clean slate, focuses on EODB as the primary goal, and ties it to requirements that maximize long-term value capture within the country. You have to think strategically.
Enter GIFTCity
GIFTCity is an emerging global financial and IT services hub, the first of its kind in India, designed to equal or exceed globally benchmarked business districts. GIFTCity offers us a one-time opportunity to create a ‘Delaware-like island’ that can offer entrepreneurs and investors the best of both worlds, while still under the control of India.
Let India-based entrepreneurs incorporate GIFTCity and accept investments in any currency from investors around the world (including investors from defined restricted jurisdictions such as neighboring countries and sanctioned countries). ), allow you to hold funds in USD or INR. , allowing residents of India to invest freely. List on NSE/BSE or NASDAQ/Hong Kong or London Stock Exchange. If you are an India-based entrepreneur, employee or investor and your company makes a profit, set it up to pay taxes in India regardless of where it is listed.
Setting up GIFTCity as a hybrid location will quickly make GIFTCity the entrepreneur of choice and ensure long-term value capture in India. Startups across India come from everywhere and GIFTCity has the potential to be a great common denominator while putting India’s decentralized ecosystem at your disposal. All domestic ones take the form of wholly owned subsidiaries, but allow his AIF in India or foreign investors to invest in his GIFTCity corporation with his INR or USD. One small but significant advantage is that all investment dollars currently held in US/Singapore banks are also held in the ‘Indian’ banking system either in US dollars or his INR .
It must be recognized that the benefits of where a startup is founded will only be realized in the long run if the startup succeeds in the end. Short-term gains are peanuts and few are worth the effort to chase such companies.
jump start
A recent development in the industry is that companies in the growth stage want a “reversal.” These are companies originally incorporated in Delaware or Singapore that are now approaching IPO scale and wish to IPO in India. GIFTCity could be an easier way for companies to ‘turn around’. Initially, we will replicate captables in this jurisdiction and gradually migrate to IP. Perhaps his one-time window of two years where companies can relocate and do an IPO in India or abroad will still capture a lot of value for everyone.
Make India the preferred and de facto jurisdiction by creating an environment for startups to thrive. And get the most out of IndiaStack by making it a fully digital experience, with a focus on ease of doing business. At some point in the future, companies outside India may also choose to incorporate into his GIFTCity, realizing India’s opportunity to become a truly global hub, with Singapore, Abu Dhabi, Delaware, Cayman and Mauritius as priority objectives. You can pick it up as the ground. all.
Let this truly be our GIFTCity. This is what attracts and sustains enormous wealth creation and value creation in India.
Disclaimer
The above views are the author’s own.
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