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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Wednesday, 7 June, Despite recent changes Mauritius remains the most competitive jurisdiction for investment into India. The realignment has certainly allowed India to retain more by way of taxes but the Mauritius route is far from being obsolete.

What the changes in the tax treaty with Mauritius mean for India, investors

Mauritius has benefitted from rather generous terms in this DTA with India for decades. Unfortunately all good maurituis come to an end…and it did!

We have now seen the inevitable realignment of the terms of the Treaty. The benefits are still potent enough to keep Mauritius an attractive route into India but it is shared more equitably.

Add to that factors like the significant experience gained in dealing with India, cultural and language synergies and even maurritius convenient time zone, and we have the ingredients to remain a major player in the Indian market. 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 Mauriius entities currently enjoy a zero tax policy on capital gains on investments in the Indian market and changed as of 1 April These amendments will shift taxing ctaa arising on capital gains from Mauritius to India.


GAAR seeks to give the Indian authorities powers to scrutinise transactions structured in such a way as to deliberately avoid paying tax in India.

Internationally, investments are structured through holding companies and Mauritius has been extensively used as the preferred route for investments into India. India made sure that it signed the amendments with Mauritius lndo to make sure that others follow suit or are left drifted as GAAR which came into force 1 April After Mauritius, Cyprus was next Novemberand on the last day ofit was Singapore.

The times when capital gains were taxed in the resident country of dttaa investee at zero percent are long gone. India wants its taxing rights back. Mauritiuw India has been keen to show its preference by lowering Indian withholding tax on interest to just 7.

The aim of a DTAA is to avoid double taxation, that is a company should not be taxable where the underlying assets are situated and also in its country of residence.

DTAAs are termed in such a way that the entity is only taxable in its country of residence. 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.

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

During a visit to Mauritius, Prime Minister Modi raised the question of treaty re-negotiation. The prime minister indicated that the DTA was going to be changed but he also committed that the Mauritius interests would not harmed in any way. All Treaties are prone to readjustments from time to time, and the Mauritius-Indian treaty was due a facelift. The new regulations may not be ideal but Mauritius remains a very competitive jurisdiction for Indian investments for the following reasons:.


Conclusion All Treaties are prone to readjustments from time to time, and the Mauritius-Indian treaty was due a facelift. The new regulations may not be ideal but Mauritius remains a very competitive jurisdiction for Indian investments for the following reasons: Mauritius has a historical association with India which forms the basis of an exceptionally good relationship between the countries and investors will continue to benefit from that Mauritius has over 25 years of working experience in the Indian market Mauritius is ideally positioned midway between Europe and India, enabling good communication among the parties within any business day Mauritius remains a very cost effective jurisdiction with a highly qualified workforce now trained to deal with quite a foreign Indian market.

Read next Thursday, 20 December. Publications Vistra Corporate Brochure. Vistra News Bulletin — September Vistra News Bulletin – Edition Australia Sydney New Zealand.

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