Mauritius assures India about disallowing shell companies

We want investors from India who come to Mauritius to add substance to what they do, says Mauritius Finance Minister

Mauritius has assured India it will not allow shell companies to operate from its soil and with a few exceptions, there were only clean investments from the island nation.

India and Mauritius will start technical negotiations on amending the double taxation avoidance convention at the end of this month. Mauritius has already submitted a draft protocol.

“We want investors from India who come to Mauritius to add substance to what they do. We don’t want shell companies. We will refuse shell companies because they are of no use to us, no use to India,” Mauritius Finance Minister Lutchmeenaraidoo Seetanah told reporters here.

The minister said there have been two or three “rotten tomatoes from India who have tried to use Mauritius as a hiding place for their ill-gotten gains.” But the island nation had been branded as “infamous” with regard to DTAC in India.

“Treating Mauritius as an infamous (with regard to the DTAC) is not good matter for India, not for Mauritius because it doesn’t reflect what it is — a win-win situation,” he said, adding there should be no doubt that Mauritius “is and has become a clean financial sector”.

He said India, through the DTAC, has received billions of dollars of investments and Mauritius, too, has benefited, including on the job front.

“In fact, we are doing in Mauritius what Prime Minister (Narendra) Modi is doing here. We are cleaning the house,” he said, while assuring full cooperation with Indian authorities to put orders in the system. Lutchmeenaraidoo said officials from the two sides will meet here on June 29-30 for technical discussions on the DTAC.

Negotiations to amend DTAC have been hanging fire for long amid India's apprehensions that it is being misused to route unaccounted money and evade taxes.

The issue at the crux is capital gains tax, which is not there in Mauritius. India wants Mauritius to agree to Limitation of Benefits clause in DTAC on the lines of Singapore so that only genuine companies can avail the treaty benefits and not shell companies.

A joint working group has been set up to find a mutually acceptable solution towards revision of the pact. About 10 meetings of the JWG have taken place so far.

“We have submitted a draft protocol for the first time to the government. The draft protocol will be used as a basis to finalise all discussions,” the Mauritius minister said, though he did not share details of citing protocol issues.

Foreign direct investment from Mauritius stood at $87.55 billion since April 2000 to March, 2015, constituting the highest 35 per cent of total FDI inflows into India.