COVID-19 pandemic is expected to be infect close to 30% of the Americans with 0.5% mortality rate, if immediate testing and medical facilities are not available. The numbers in India and other parts of the world are also alarming. Consequent to a range of measures adopted by countries around the world like travel restrictions, social distancing, lockdown, trade and commerce are affected and add to the economic risk for global and local businesses to survive. In this blog, I am discussing below questions for business owners from the U.S. and India perspective:
What is the current economic reality?
Mainstream financial firms like J.P. Morgan, Goldman Sachs, Morgan Stanley and McKinsey & Company foresee a sharp recession in the U.S. economy in the second quarter which may be short-lived and growth in the third and fourth quarter. This economic reality cannot be outweighed and as the governments around the world are ensuring health as a priority, they are coming up with economic measures to address the downturn. Below is a snapshot of the economic measures undertaken in the U.S. and India:
With the current economic reality and above measures taken by the governments, it is important for a business owner to undertake a financial health checkup for his or her business. It will help to assess the liquidity position of your business and if there is a need to change your business plan. Before making any decision to furlough your staff, check your expense sheet, hold on to your discretionary expenses and identify a credit facility extended by the government that addresses your situation. For example, small businesses in the U.S. have been extended credit facility at reduced interest rates. Similarly, State Bank of India (an Indian public sector bank) has announced emergency credit line for businesses in India.
For global businesses affected by the lockdown and either intend to restructure or dispose a profitable division or business, should plan it now. The economic viability to address this situation to either enter new markets or windup businesses is perfect. The tax laws in India and the U.S. provide tax free mergers and acquisitions, provided the specific conditions are satisfied. Additionally, regulatory aspects to investment out of India need to be aligned to guidelines issued by the Reserve Bank of India under the Overseas Direct Investment or Liberalized Investment Scheme.
We are considerate that your positive attitude to sustain or grow your business brings along the best time and opportunity your way to just do it. We are here during the COVID-19 pandemic to professionally assist you.
Asena Advisors offers tax consultancy specifically curated to its client’s needs. If you have complex multi-jurisdictional tax issues that you need assistance contact us.