Change in the provision of Indian tax of the underlying fund of J30 JPMorgan India
21 March 2019
We have been notified by JPMorgan Asset Management (Singapore) Limited (“The Company”) about a change in the provision of the Indian tax of the underlying fund of J30 JPMorgan India. This change has come into effect on 05 June 2018 (the “Effective Date”).
Below are the key areas for your attention which we have extracted from the shareholder circular of the underlying fund of J30 JPMorgan India.
Indian tax provisioning arrangement of the underlying fund of J30 JPMorgan India
The underlying fund is required to annually renew the certificate of tax residency (“TRC”) to evidence its Mauritius tax residence status. The renewal of the latest TRC has been applied for by the underlying fund. However, as at the date of this notification, a renewed TRC has not yet been issued by the Mauritius Revenue Authority. Due to this uncertainty in obtaining the TRC, the manager of the underlying fund, based on professional tax advice and having discussed this matter with the trustee, has decided to make a provision for 100% of the underlying fund’s potential Indian tax at the rate of approximately 16.22% on all realised and unrealised short-term gains (i.e. gains on securities held for less than one year) of Indian securities from 5 June 2018. As at 24 January 2019, the total Indian tax provision for realised and unrealised short-term gains on Indian securities amounted to 0.20% of the underlying fund’s net asset value. This amount is likely to change daily and may increase or decrease depending on sale activities, market movements and length of holding of Indian securities in the underlying fund’s portfolio.
The change in the tax provisioning basis of the underlying fund was implemented to reflect the likelihood of the underlying fund’s inability to claim the benefit under the India-Mauritius tax treaty due to the Mauritius Revenue Authority’s delay in issuing the renewed TRC. Provisioning for such tax obligation will put the underlying fund in a better position to meet the anticipated imposition of tax by the Indian government should such unrealised short-term gains become realised before issuance of the renewed TRC. This is considered to be in the best interest of the underlying fund and its investors and would not materially prejudice the interests of the investors.
The manager of the underlying fund will continue to closely monitor the situation and will further update all relevant investors if there is a significant change in the Indian tax provisioning arrangement in the underlying fund’s portfolio. In the event that any part of the tax provision is no longer required based on professional tax advice, it will be released back into the underlying fund. Any shortfall between the provision and the actual tax liabilities, which will be debited from the underlying fund’s assets, will adversely affect the underlying fund’s net asset value. Conversely, the actual tax liabilities may be lower than the tax provision made.
Should you have any questions regarding these changes, please contact International Funds & Investments.