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Consortium Advisory

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Consortium Advisory

A Consortium arrangement involves several companies combining their efforts to work on a particular project or bid, sharing their resources and knowledge. Each party generally remains independent while contributing to the consortium’s goals. Such arrangements are common in large-scale projects, especially when these are cross-border partnerships.

Taxation of consortiums is a complex matter, especially when foreign entities are involved. It is the tax complexities faced in the structuring of such consortium to prevent being categorized as an Association of Persons (AOP) under Indian tax law, which could result in greater tax burdens. Furthermore, there are detailed rules about taxing offshore supplies, services, and technology transfers within a consortium.

We at AKM Global have wide experience about consortium arrangements, particularly for international collaborations. Our team of proficient and experienced professionals provide advisory services on consortium arrangements which assist business organizations to deal with the complex tax challenges while ensuring compliance and reducing liabilities.

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Our services include the following

  • Assist in structuring the consortium contracts to prevent AOP classification and, consequently, reduce tax exposure.
  • Aid in reviewing the contracts from the tax perspective and outline the scope of work, roles and responsibilities for each partner.
  • Provide consulting on the management of tax implications related to foreign trade, services, and technology transfers.
  • Focus on optimizing the consortium's tax efficiency and financial outcomes.
  • Support for the consortium throughout its lifecycle including the initial structuring to managing the ongoing tax management.

Frequently Asked Questions (FAQs)

What is a consortium, and how is it executed?

A consortium is a temporary partnership between two or more organizations which is set up to collaborate on a project or to achieve a common goal. Each member brings its own expertise, resources etc. into the consortium and shares risk, responsibilities, and profits.

Why is a consortium formed?

A consortium allows firms to put together resources and expertise that may enable a business to take up larger projects or venture into new markets that might otherwise be beyond their individual control. The nature of this structure distributes the risk among the members and encourages collaboration, thus raising the success rate by being able to exploit complementarities in skill and knowledge.

How would you differentiate a consortium from a joint venture?

A consortium is created for one single, short-term project. Although its composition is similar to a joint venture since membership of a consortium and a joint venture involve two or more parties acting in concert, each member maintains their separate legal identity. A joint venture may also be established through a new legal entity wherein ownership and control could be shared with profit participation for long-term purposes.