Sumitomo Mitsui faces $670 million tax bill on Fullerton acquisition

Sumitomo Mitsui Financial Group, Inc., is facing a 55 billion rupee $670 million tax bill from India on its roughly $2 billion acquisition of Fullerton India Credit Co., far outweighing what the Japanese lender has set aside, according to people familiar with the matter.

The tax department of South Asia has asked the bank to pay the amount on behalf of seller Fullerton Financial Holdings Pte. The people said they wanted not to be named because the information isn't public, so they argued that it should have withheld the sum during the acquisition.

They said that Sumitomo Mitsui had held back only $170 million for the deal that was completed last year, taking its additional tax liability to $500 million. One person said the demand was made in late November.

Sumitomo Mitsui to Buy Fullerton India Stake for $2 Billion 1 The demand for SMFG comes after India ended multiyear tax disputes with global companies from Cairn Energy Plc to Vodafone Group Plc that tarnished the nation's image as a business-friendly destination. Prime Minister Narendra Modi had scrapped a nine-year old rule on retroactive taxes in 2021 that had triggered tax demands of billions of dollars.

Sumitomo Mitsui is facing much higher costs than originally anticipated, as a result of the sudden request. Japan's second-largest lender is working with India's government and Fullerton to find a solution, the people said. Fullerton Financial is a unit of Singapore's state-owned investor Temasek Holdings Pte and owns the remaining 25% of Fullerton India, according to its website.

With weak growth prospects at home, Sumitomo Mitsui has been allocating resources to Asia s emerging markets and acquired a 74.9% stake in Fullerton India last year, marking the first entry into the country s retail financial business by a Japanese bank.

A spokesman for Sumitomo Mitsui declined to comment on the transaction, but said that the lender is taking actions that comply with local laws and regulations and will continue to take appropriate measures based on these.

A finance ministry spokesman didn't respond to an email and calls seeking comment, while a Singapore-based representative for Fullerton Financial did not respond immediately to a request for comment.

With help from Elffie Chew and Joyce Koh.

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