Vodafone Group Plc (VOD: Quote,VOD.L) might make a provision of $2.2 billion to cover some tax risks in India, as a result of a law change in the South Asian country, Bloomberg reported, citing an interview with the telecom giant's Chief Financial Officer Andy Halford.
The company is consulting on the need for such a provision and a decision will be made by November.
In January, Vodafone received a favorable judgment from the Indian Supreme Court in a tax case related to the acquisition of interests in mobile operator Hutchison Essar Limited.
The Court concluded that Vodafone had no liability to account for withholding tax on its acquisition of interests in Hutchison Essar Limited (now Vodafone India Limited) in 2007. The taxes amount to nearly $2.2 billion.
The $11.1 billion acquisition of a 67 percent stake in Hutchison was conducted offshore, with Vodafone's Dutch unit Vodafone International Holdings BV acquiring CGP Ltd., a Cayman Islands holding company controlled by Hong Kong-based Hutchison.
In September 2007, the Indian tax department billed 112.2 billion rupees in capital gains tax. The department noted that Vodafone should have withheld that amount from its payment to Hutchison. Vodafone has been fighting the legal battle since then.
After the ruling from the country's highest court, the government of India amended the law to tax cross-border transactions dating back to April 1, 1962 with retrospective effect.
VOD closed down 1 percent on Friday at $28.47 on 6.87 million shares.
VOD.L settled lower by 0.85 percent at 175.85 pence on 104.69 million shares.
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by RTT Staff Writer
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