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No taxes owed by GMR from US$271m arbitration award

The arbitration ruling indemnified the Indian developer from any tax liabilities.



Indian infrastructure giant GMR does not owe any taxes from US$271 million paid as compensation for the cancellation of an agreement to develop the country’s main international airport, the Attorney General’s office said Thursday.

The Maldives Inland Revenue Authority issued notices in late 2017 for US$14.4 million as business profit tax, US$2.8 million as withholding tax and fines amounting to US$3.3 million after the payout awarded by a Singaporean arbitration tribunal was settled in November 2016.

In the wake of media reports last week that GMR has yet to pay the taxes, the AG office explained in a statement that the Maldives government and the state-owned Maldives Airport Company Ltd would be liable for any taxes owed from the arbitration award.

According to a section of the confidential arbitration ruling quoted by the AG office, if any sum was to be deducted as taxes, “the amount payable under the award shall be increased to enable [the GMR-led consortium] to receive the sum it would have received if the payment had not been liable to tax.”

The AG office also quoted from a letter sent by MACL after making the payment to GMR, in which the company said it had been informed by the government that no taxes would be imposed.

“As a result, there is no need for any sum to be added to the Final Award Sum to take into account any tax to be imposed by the Maldives Inland Revenue Authority,” the letter stated.

The AG office statement came after former deputy attorney general Ahmed Usham, the new MP-elect for Vilimalé, called on Attorney General Ibrahim Riffath to clear up whether he had advised the tax authority that GMR did not owe any taxes.

“When this case was at arbitration, the current AG had worked as a lawyer for GMR,” tweeted Usham, who was part of the legal team that represented the state.

In response, Riffath denied making any decisions related to GMR. “And I haven’t allowed a conflict of interest. I will work in defence of what’s right. We pledged to establish justice with transparency,” he tweeted.

According to the AG office statement released the following day, the tax authority sought legal advice on January 10 about taxing the arbitration award. Citing the arbitration ruling and the airport company’s letter, the AG office advised MIRA that the government and MACL would be liable to pay any taxes the authority decided to impose.

The legal advice was reportedly conveyed by the deputy attorney general.