Reverse flipping

Reverse flipping

Subject :Economy

Key Points:

• Indian startups that had headquartered their companies overseas in places like Mauritius and Singapore are now considering bringing them back (i.e. Reverse Flipping) to India.
• Some of the reasons for this trend are:
  • Successful local listing by Tech unicorns like Zomato, Paytm, and Nykaa.
  • Companies in Fintec
  • Recent relaxations in the round-tripping rules by the Reserve Bank of India (RBI) and the government’s policy support for startups are also encouraging the shift.
• Challenges to flipping:
  • Taxation issues: Change of legal jurisdiction, creates a taxable event for its shareholders, which can be a complex task. The new jurisdiction may have different tax laws compared to the previous one, leading to potential tax implications for shareholders in both international and Indian contexts. It can also lead to loss of accumulated tax benefits in the foreign jurisdiction
  • Funding challenge: Reverse flipping might pose challenges for the company in attracting foreign investors and accessing international capital markets in the future. Since foreign investors may still be less familiar with the structures and regulations of India-based companies, the investment process may be slower, ultimately creating obstacles.