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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However, the protocol will impact all prospective investments with effect from April 1, As India opened the doors of its economy to foreign investment inMauritius became a favourite jurisdiction for channelling investments into India.
The benefits are still potent enough to keep Mauritius an attractive route into India but it is shared more equitably. Therefore, any resident 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.
DTAAs are termed in such a way that the entity is only taxable in its country of residence. 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.
Soon enough, the Indian tax officers did not appreciate the prospect of perceived letter box companies in Mauritius claiming the tax exemptions and sent tax bills to them, alleging misuse of treaty. Vistra News Bulletin – Edition A much needed and timely impetus. Think Live Work Play. This seems to favour shareholders returns, as opposed to other countries which might still exempt entities of capital gains as stipulated in their DTAA with India but are taxed at a much higher rate domestically.
Mauritius has benefitted from rather generous terms in this DTA with India for decades. However, the debate is not yet settled down despite the Apex Court ruling and the tax authorities have been examining investments from Mauritius and have sought to deny the Treaty benefits under the pretext of Treaty Shopping.
Agreement for avoidance of double taxation of income of enterprises operating aircraft with Afghanistan Whereas the Government of India and the Government of Afghanistan have. This well settled principle has been re-stated by the Supreme Court in the case of Union of India vs. What the changes in the tax treaty with Mauritius mean for India, investors https: For Further Details Contact: In doing it plays a critical role in building a better working world for their people, their clients and their communities.
Limited Agreements Agreement for avoidance of double taxation of income of enterprises operating aircraft with Afghanistan Whereas the Government of India and the Government of Mauritiis have. Conclusion All Treaties are prone to readjustments from time to time, and the Mauritius-Indian treaty was due a facelift. Income-tax Double Taxation Relief Aden Rules, – Present position thereunder These Rules being consistent with the corresponding provisions of the Act, continued to be.
It is also expected to discourage speculators and non-serious investors, and thereby reduce volatility in the market. These amendments will shift taxing rights arising on capital gains from Mauritius to India.
This approach has resulted in significant long-drawn litigation in a number of cases involving investments in India through Mauritius. The present Government came to power promising action on black ino stashed abroad. Prev Far-reaching implications of the Mauritius protocol. Home Explained What the changes in the tax treaty with Mauritius mean for India, investors.
Mahritius fact that the capital asset is located in India is immaterial.
International Taxation >Double Taxation Avoidance Agreements
Paragraph 4 deals with taxation of mauritiuss gains arising from the alienation of any property other than those mentioned in the preceding paragraphs and gives the right of taxation of capital gains only to that State of which the person deriving the capital gains is a resident.
The best in all-American drinks. As we have pointed out, Circular No. 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.
The times when capital gains were taxed in the resident country of the investee at zero percent invo long gone. 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.
Dgaa this blog EY will provide viewpoints, commentary on trends and the delivery of fresh perspectives to evolving issues relevant to executive decision makers. 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.
India-Mauritius tax treaty: An end and a new beginning
India made sure that it signed the amendments with Mauritius first; to make sure that others follow suit or are left drifted as GAAR which came into force 1 April Mauritius entities currently enjoy a zero tax policy on capital gains on investments in the Indian market and changed as of 1 April Comprehensive Agreements Agreement for Avoidance of Double Taxation and prevention of fiscal evasion with Armenia Whereas the annexed Convention between the Government of the Republic of India and the.
Dtaa to that factors like the significant experience gained in dealing with India, cultural and language synergies and even the convenient time zone, and we have the ingredients to remain a major player in the Indian market. Despite recent changes Mauritius remains the most competitive jurisdiction for investment into India.
Australia Sydney New Zealand. The protocol gives India the right mauritiuw tax capital gains on transfer of Indian shares acquired on or after 1 April Photo: Recent news of India and Mauritius signing a Protocol to amend their 33 year old tax treaty caused seismic changes in the tax world.
The Double Tax Avoidance Agreement between India and Mauritius
The imposition of capital gains tax on the acquisition of shares of Mauritiu companies after March 31, could, however, result in a slowing of the flow of investments. All Treaties are prone to readjustments from time to time, and the Mauritius-Indian treaty was due a mauritiuz. Comprehensive Agreements Agreement for avoidance of double taxation and prevention of fiscal evasion with Australia Whereas the annexed Agreement between the Government of the Republic of India and the.
We have now seen the inevitable realignment of the terms of the Treaty. Video Slideshow Audio Twinterview.
However India has been keen to show its preference by lowering Indian withholding tax on interest to just 7. The new regulations may not be ideal but Mauritius remains a very competitive jurisdiction for Indian investments for the following reasons:. Agreement for Avoidance of Double Taxation and prevention of fiscal evasion with Armenia Whereas the annexed Convention between the Government of the Republic of India and the.