Vodafone steps up tax row with India

Vodafone has told the Indian government it is moving towards international arbitration

Vodafone has threatened to take India to international arbitration over planned retrospective tax legislation.

The firm is India's largest overseas corporate investor, but has been caught up in a five-year tax battle.

The issue relates to Vodafone's 2007 takeover of Hong Kong-based Hutchison Whampoa's Indian mobile unit.

Vodafone said a move to retrospectively tax overseas mergers would go against court decisions and legal protections given to investors.

As a result it said it had served the Indian government with a "notice of dispute" in a first step toward international arbitration.

And it argued that the new Indian tax legislation was an attempt to bypass a ruling by the country's Supreme Court in January that Vodafone was not liable for taxes and penalties of up to $4.4bn (£2.8bn)

To retroactively tax overseas mergers would "countermand" the court verdict and "violates international legal protections granted to Vodafone and other international investors in India", Vodafone added in a statement.

The notice was served by Vodafone's Dutch subsidiary.