Data & Intelligence

Tax and the Strategic Investment Decision: Where, Why, When and Comparative Tax Elements in 15 Emerging Markets

By Ann Marie Plubell, Vice President, Regulatory Affairs, EMPEA

Introduction

The complexity of tax considerations on the strategic decision to select and enter an emerging market cannot be denied. The value of early tax analysis from multiple perspectives for both the funds (here termed “GPs”) and the investors in those funds (here termed “LPs”) also cannot be denied. Early analysis influences positive outcomes for all involved throughout their relationships and well beyond. This article is not intended to be exhaustive and is not a substitute for the skilled and expert guidance of the tax professional. It is offered to introduce an orderly array of selected tax planning questions that inevitably arise when investigating a target market and offers a sequence of queries for investigation.

This article also includes a table comparing thirteen key tax elements in fifteen select emerging markets and the U.S. A GP’s and LP’s understanding of the tax treatment of the long-term investments that form the heart of a fund’s investment portfolio and the tax treatment of returns on those investments to all parties at each layer and each stage in a fund’s life and beyond and from each other’s perspectives is a dynamic process. Understanding facilitates alignment of interests from the earliest opportunity and minimizes surprises while providing the chance to craft what will happen when the unexpected inevitably does occur. We hope the article may also prove helpful to regulatory, policy and tax authorities interested in exploring ways to advance tax regimes optimal for catalyzing private equity investment into their countries such as those identified in the EMPEA Guidelines.

EMPEA represents the leading global investors in EM. I look forward to working alongside to drive much-needed capital for financing entrepreneurs and businesses worldwide.

Renuka Ramnath | Founder, Managing Director & Chief Executive Officer, Multiples Alternate Asset Management Private Limited

EMPEA plays an important and energetic role across the markets it represents, driving outreach and research initiatives, and promoting the role of private capital.

Brian Lim | Partner and Head of Asia and Emerging Markets, Pantheon Ventures

The developed markets have no equivalent to the role EMPEA is playing as a convener and source of trusted information in the emerging markets.

David Rubenstein | Co-Founder and Co-Executive Chairman, The Carlyle Group

I’m honored to join fellow industry pioneers in the leadership of an unparalleled network, filled with first movers, shaping the future of industries and communities.

Dr. Andrew Kuper | Founder and CEO, LeapFrog Investments

EMPEA's market and industry intelligence opens doors to new sources of capital.  I look forward to the future success of EMPEA and its members.

Torbjorn Caesar | Senior Partner, Actis

While there are certainly challenges for the industry, the opportunities abound in our target markets and globally, making a global association like EMPEA more relevant than ever.

Drew Guff | Managing Director & Founding Partner, Siguler Guff & Company