According to those familiar with the situation, Sumitomo Mitsui Financial Group (SMFG) Inc.’s tax bill from India on its roughly $2 billion purchase of Fullerton India Credit Co. is 55 billion rupees ($670 million), far exceeding the amount the Japanese lender has set aside.
According to the people, who asked to remain anonymous because the information is private, the South Asian government’s tax department has requested the bank pay the sum on behalf of the seller Fullerton Financial Holdings Pte.
According to them, Sumitomo Mitsui only withheld $170 million from the sale, which closed last year, increasing its additional tax bill to $500 million. One of the individuals claimed that the demand was made in late November.
Sumitomo Mitsui will incur substantially higher costs as a result of the abrupt request. According to the sources, Fullerton is collaborating with the government of India and Japan’s second-largest lender to find a resolution. According to its website, Fullerton Financial, a division of Singapore’s state-owned investor Temasek Holdings Pte, owns the remaining 25% of Fullerton India.
Sumitomo Mitsui has been investing in Asia’s growing countries in recent years due to the lacklustre growth prospects at home. Last year, the Japanese bank became the first to enter the country’s retail financial sector when it purchased a 74.9% interest in Fullerton India.
According to a Sumitomo Mitsui spokesman, the lender is “taking efforts that conform with local laws and regulations and will continue to take appropriate measures” based on these. The spokesperson declined to comment on the specific transaction.
A Singapore-based representative for Fullerton Financial did not immediately respond to a request for comment, while a spokeswoman for the Indian finance ministry did not return calls or emails seeking comment.
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