💡 Why It Matters
The move addresses a significant structural challenge for Indian asset managers seeking to serve non-resident investors. By establishing a presence in an established international financial centre like ADGM, Artha Bharat can offer tax-efficient structures that align with the preferences of Middle Eastern sovereign wealth funds, family offices, and Non-Resident Indians (NRIs). It also highlights the ongoing friction between India’s current tax regulations and the goal of positioning GIFT City as a seamless hub for cross-border capital.
Regulatory Milestone in Abu Dhabi
Artha Bharat Investment Managers has secured a full Financial Services Permission from the regulator of the Abu Dhabi Global Market (ADGM). This approval grants the GIFT City-based asset manager a regulated presence in the United Arab Emirates, enabling it to manage funds, operate discretionary portfolios, and provide advisory services to professional clients.
The licence was granted to the firm’s ADGM entity following an in-principle approval. This regulatory foothold is a strategic step for the firm, which manages over $800 million across its platform, to expand its multi-jurisdictional capabilities.
🏛️ Background & Context
Under current Indian rules, GIFT City Category III funds generally qualify for specified-fund status only if units are held by non-residents. However, when one GIFT City vehicle invests in another, the intermediate layer can jeopardize the receiving fund’s tax status, even if the ultimate capital is from overseas. Additionally, for resident Indian investors, gains in overseas equity-oriented funds held for more than 24 months attract long-term capital gains tax at a base rate of 12.5%, plus surcharge and cess. The ADGM structure allows gains to remain within the fund and be reinvested without each transaction becoming a taxable event, with tax crystallising only on distributions or redemptions.
👁️ What To Watch Next
Readers should watch for the launch of Artha Bharat’s first vehicle in ADGM, which is planned to use an Incorporated Cell Company structure similar to Singapore’s variable capital companies. The firm intends to offer these as Exempt Funds through private placements. Furthermore, the firm has sought clearer tax treatment for outbound investment structures to ensure tax is levied at the investor level in their home jurisdiction rather than creating uncertainty at the fund level in India.
