Putting Deals through a Microscope | Traversing Transactions attempts at dissecting a deal by analyzing various aspects and nuances of an M&A Transaction, traversing through a complex mesh of Commercial, Regulatory, and Tax ("CRT") imperatives!
Putting Deals through a Microscope | Traversing Transactions attempts at dissecting a deal by analyzing various aspects and nuances of an M&A Transaction, traversing through a complex mesh of Commercial, Regulatory, and Tax ("CRT") imperatives!
Putting Deals through a Microscope | Traversing Transactions attempts at dissecting a deal by analyzing various aspects and nuances of an M&A Transaction, traversing through a complex mesh of Commercial, Regulatory, and Tax ("CRT") imperatives!
Deferred vs. Contingent Consideration: FEMA and Taxation
One is a question of “when”. The other is a question of “if”. The distinction reshapes both FEMA compliance and tax outcomes.
Deferred consideration: fixed amount, deferred payment. Permitted under FEMA NDI Rules (18 months, 25% cap). But capital gains tax accrues on Day Zero, including the portion not yet received. Cash flow mismatch is a real structuring concern.
Contingent consideration: variable amount, milestone-dependent. Not permitted for inbound transactions under FEMA, unless routed through escrow. Tax law does not resolve whether the earnout, when received, is capital gains or income from other sources.