The Financial Express. By. Sameer Gupta Tax Leader, Financial Services, EY India. The India-Mauritius treaty (IM treaty) has had a chequered destiny and has . The Double Tax Avoidance Agreement (herein referred as “DTAA”) entered into between India and Mauritius provides for potential tax exemption to the foreign. Jun 7, Negotiations to amend the Mauritius-India DTAA finally came to an end last May, when officials of both governments signed what is now termed.

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The Double Tax Avoidance Agreement between India and Mauritius

All Treaties are prone to readjustments from time to time, and the Mauritius-Indian treaty was due a facelift. Recent news of India and Mauritius signing a Protocol to amend their 33 year old tax treaty caused seismic changes in the tax world. Unfortunately all good things come to an end…and it did! DTAAs are termed in such a way that the entity is only taxable in its country of residence.

Home Forbes India India-Mauritius tax treaty: Experts say the Netherlands may emerge as an alternative. Significantly, this development also blunts the impact of the much condemned GAAR, which would have conflicted with the capital gains exemptions under the Mauritius and Singapore treaties. In other words, the circular shall prevail even if inconsistent with the provisions of the Income-tax Act,in so far as assessees covered by the provisions of the DTAC are concerned.

The Income Tax Department appeals to taxpayers NOT to respond to such e-mails and NOT to share information relating to their credit card, bank and other financial accounts. Click to view the institutions registered under section 80G, 12 A and more. Article 13 4 of the DTAA provides that the profits made by a resident of a contracting state from the alienation of shares shall be taxable only in that state. Globally too there was widespread resentment against companies failing to pay their fair share of taxes.

Capital gains on derivatives and fixed income securities will continue to be exempt. However, the protocol will impact all prospective investments with effect from April 1, India wants its taxing rights back. P-Notes are instruments issued by registered foreign institutional investors to overseas investors.

After a series of high-profile court hearings, the status quo appeared to have been restored. During a visit to Mauritius, Prime Minister Modi raised the question of treaty re-negotiation. The new regulations may not be ideal but Mauritius remains a very competitive jurisdiction for Indian investments for the following reasons:.


After Mauritius, Cyprus was next Novemberand on the last day ofit was Singapore. GAAR seeks to give the Indian authorities powers to scrutinise transactions structured in such a way as to deliberately avoid paying tax in India.

India-Mauritius DTAA amendments – a Bird’s eye view | Taxsutra

Though not completely unanticipated, the change is significant for foreign investors to go back to the drawing board and reassess their structures. The relevant extract of the Circular No. While the protocol gives India the right to tax capital gains arising from sale or transfer of shares ,auritius an Indian company acquired by a Mauritian tax resident, it proposes to exempt investments made until March 31,from such taxation. Copyright Registration ph no: The protocol gives India the right to tax capital gains on transfer of Indian shares acquired on or after 1 April The realignment has certainly allowed India to retain more by way of taxes but the Mauritius route is far from being obsolete.

Soon enough, the Indian tax officers did not appreciate the prospect of perceived letter box companies in Mauritius claiming the tax mauriyius and sent tax bills to them, alleging misuse of treaty.

Why ibdo should reveal their failures. The benefits are still potent enough to keep Mauritius an attractive route into India but it is shared more equitably. Sharpen your risk strategy High growth segments of the delicious Indian food and beverage industry Public Sector Banks Recapitalisation: After 31 Marchtax will be charged at full domestic tax rates.

While the golden tap kept flowing, apprehensions on round tripping of money by Indians via Mauritius continued even as successive Governments made efforts to renegotiate the treaty. These amendments will shift taxing rights arising on capital gains from Mauritius to India. As we have pointed out, Circular No. The present Government came to power promising action on black money stashed abroad. It indp leaders who team up to deliver on their info to all its stakeholders.

Why a deal can fail to create value Want to build a purposeful mauritiys Therefore, any data of Mauritius deriving income from alienation of shares of Indian companies will be liable to capital gains tax only in Mauritius as per Mauritius tax law and will not have any capital gains tax liability in India.


The protocol gives India the right to tax capital gains on transfer of Indian shares acquired on or after 1 April Photo: While it is expected that benefits of the Singapore treaty would also be available until March 31,experts hope the government would provide a level playing field for investments, and avoid arbitrage between jurisdictions. An end and a new beginning The stride taken by the Government perhaps also reflects their belief in the economy and the ability to attract foreign investment without tax incentives.

The Government also deserves to be applauded for giving sufficient notice of close invo a year before the change takes effect as well as providing protection to existing investments. The information presented on this blog should not be construed as legal, tax, accounting or any other professional advice or service.

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Video Slideshow Audio Twinterview. It is also expected to discourage speculators and non-serious investors, and thereby reduce volatility in the market. Therefore, the benefits accorded under the Singapore Tax Treaty would fall away, unless amended.

This approach has resulted in significant long-drawn litigation in a number of cases involving investments in India through Mauritius. Prev Far-reaching implications of the Mauritius protocol. The investment strategy between the two long-term investment partners must now be revisited because of the introduction of GAAR and due to the amendments in the DTAA, both effective from 1 April While Mauritius has traditionally accounted for almost a third of the total FDI inflow into India, Singapore has emerged as a preferred destination over the last few years.

Agreement for avoidance of double taxation with Mauritius — Clarification inndo. The Finance Ministry statement said the protocol would tackle issues of treaty abuse and round-tripping of funds attributed to the India-Mauritius treaty, curb revenue loss, prevent double non-taxation, streamline the flow of investment, and stimulate the flow of exchange of information between India and Mauritius.