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Rich Indians have reportedly started creating and registering their family trusts in tax-friendly locations such as Malta, Dubai and Singapore to insulate themselves from the taxman and other government agencies.

According to an Economic Times report, these Indians are transferring their assets, including shares held in India and money repatriated from India, to family trusts abroad fearing that the government agencies might harass them in case one of their companies default on a loan in coming months due to “stress in the system”.

“Selectively, Indians are creating family trusts outside India hoping that they could get some insulation or asset protection in case of any loan default,” Sandeep Nerlekar, MD, Terentia Consultants, one of India’s leading players managing family trusts, was quoted as saying in the report.

With the latest information exchange and other laws, it is beneficial for these trusts created by non-residents from a tax point of view, said Nerlekar.

The newly-created trusts would make it difficult for the Indian authorities to access to the assets held outside the country, the report stated.

Rajmohan Krishnan, managing director, Entrust Family Office, said: “The reasons being that HNIs are looking to diversify their investments by having assets outside India and enjoying some tax benefits, complying within the regulatory norm.”

Earlier, countries such as Switzerland and Ireland were the favourite destinations for these Indians. They would route the money for investments in the UK or other countries outside India, it said.

Family trusts are also being created in the US, Africa and even Abu Dhabi in the UAE, apart from Malta and Dubai. According to the report, many promoters are creating family trust structures, where all their assets are held by the trust. Many families are also creating these trusts as part of tax planning, it said.

First Published:Dec 13, 2019 11:47 AM IST