CBAM, permanent establishment rules, transfer pricing key in India’s outbound FDI: EY
global concern surrounding environmental issues and clean energy pose certain threats to Indian companies planning to invest abroad, consultancy major EY said in a report. While deeper insights are needed in areas like Carbon Border Adjustment Mechanism (CBAM), transfer pricing regime, permanent establishment rules, it said that higher investment limits for strategic PSUs investing overseas and investment by family offices are expected to spur overseas investments.
India’s outward foreign investment increased to $22.88 billion in FY23 from $1 billion in FY02.
On CBAM, it said: “Effective October 2023, it will be an additional cost for importers of specific emission-intensive product categories into the EU and means new compliance and reporting obligations. Companies therefore need to proactively address CBAM-related challenges for exporting ‘covered products’ to their overseas subsidiaries by understanding the requirements, assessing the potential impact on their operations and by developing a compliance plan”.
Referring to India’s new-age free trade agreements (FTA), it said that Indian MNCs would need to undertake comprehensive market analysis to identify new avenues for growth and understand tariff reductions, market access, regulatory changes and overall compliance environment to seize emerging opportunities and competitiveness in the post FTA regime.
“As companies navigate this expansion, they must astutely manage the local environment and manage emerging challenges like the Carbon Border Adjustment
