Mauritius gives stability to tax deal with India

Mauritius has not included India in its global tax treaty, removing uncertainties in the minds of taxpayers over provisions of the double taxation avoidance agreement (DTAA) between the two countries.

The island country has signed a Multilateral Instrument (MLI) to implement tax treaty-related measures to prevent base erosion and profit sharing (BEPS). It, however, excluded India from this.

This has allayed fears among investors that the MLI could have overridden some of the provisions of the DTAA, says Amit Maheshwari of accountants Ashok Maheshwary and Associates.

India and Mauritius had amended their DTAA last year, to give Delhi the right to tax capital gains arising from 2017-18 onwards from transactions in shares of an Indian resident company acquired on or after April 1, 2017. For gains arising in the transition period up to end-March 2019, the tax rate is limited to half the domestic one in India, subject to Limitation of Benefit (LOB) provisions.

These provisions could have been overridden had Mauritius included India in the MLI, Maheshwari says.

Girish Vanvari, tax head at consultancy KPMG, says the move will not impact investments in India routed through Mauritius.

In spite of the work on the MLI being on since May 2015, the amendment to the bilateral tax treaty between India and Mauritius in May 2016 only acted as a precursor to indicate that Mauritius would not include India in the provisional list, to address concerns on the overriding impact of the MLI over the bilateral tax treaty, reiterated now, he says.

PwC says it needs to be seen to what extent the BEPS recommendations would be agreed to between the two countries.