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MNC Esops to Indian staff face tax scrutiny

MNC Esops to Indian staff face tax scrutiny

Employee stock options (Esops) that multinationals such as Microsoft, HP and Oracle grant their employees in India have come under the tax department’s lens, said people with knowledge of the matter. It has sent notices questioning the valuation of such Esops and how parent companies cross charge the cost of Esops with their Indian arms, they said.

The department’s stand could lead to companies having to pay more tax, experts said. Microsoft refused to comment, while Employee stock options (Esops) that multinationals such as Microsoft, HP and Oracle grant their employees in India have come under the tax department’s lens, said people with knowledge of the matter. It has sent notices questioning the valuation of such Esops and how parent companies cross charge the cost of Esops with their Indian arms, they said.

The department’s stand could lead to companies having to pay more tax, experts said. Microsoft refused to comment, while HP and Oracle did not respond to ET’s queries.

Many multinationals give Esops to their Indian employees and then cross charge the cost to their Indian arm. The department is questioning the valuation of Esops for the purposes of domestic and international taxation, said the persons cited above. Cross charges involve sharing of expenses between the offices of a company. Given that one of the parties is located overseas, such transactions have to be at arm’s length

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