Mauritius takes fresh steps to address round-tripping concerns

As a revision to the Indo-Mauritius tax treaty hangs in balance, the financial sector watchdog of the island nation has said its fresh conditions for grant of tax residency certificates will help address India's concerns on suspected round tripping of funds.
Asserting that it has stringent measures to curb any round-tripping of funds to and from India, the FSC also said that Mauritius has responded to "all requests" from Indian counterparts and nothing is pending at its end.
Against the backdrop of persisting concerns over illicit fund flows, the proposed revisions to India-Mauritius tax treaty have been hanging fire for a long time despite several rounds of bilateral discussions.

As part of efforts to make the processes more smooth for overseas entities that would help bolster its financial sector, Mauritius has modified the requirements in the application form for Tax Residency Certificate (TRC).
"The additional substance requirements have been introduced not only to address the concerns of India but also to create more economic activity in Mauritius, in line with the government policy," an Financial Services Commission (FSC) spokesperson told PTI.
Noting that licence would not be granted to an entity that does not have substance in Mauritius, FSC said it has a stringent licensing framework and a robust surveillance and on-going monitoring framework that prevents round tripping.

"The new TRC application process will ensure smooth submission of TRC applications, processing, recommendations and notifications," FSC said.

According to the regulator, the changes have been done in line with the government's policy to further develop the island nation's financial services sector.
Mauritius is a major source of foreign investments coming into India. Investments from entities based in the island nation to India totalled USD 87.55 billion during the period from April 2000 till May 2015.
"The government has introduced additional substance requirements to be met by Category 1 Global Business Companies," FSC said.
This is in addition to the existing requirements that need to be fulfilled before FSC grants licence. Entities, including those seeking renewal, have to use the amended TRC application form, introduced with effect from August 3.

The FSC also said that Mauritius has been very prompt in responding to information request from Indian authorities.
"Records show that Mauritius has replied to all requests for information from Indian counterparts, and no instances of not replying to Indian counterparts have ever been reported to the FSC Mauritius," the watchdog said.
Noting that there are several measures in place to respond favourably to requests and assistance related to tax matters, FSC said, there are also "stringent 'Indian' conditions to prevent round-tripping".
An official from the Indian revenue department is also based in the island nation.
Besides, Mauritius last year decided to provide automatic exchange of tax-related information with India.

According to FSC, the decision was to "give greater credence to the island economy's assertions that it has sound systems and processes in place to prevent misuse of its low-tax regulations by investors seeking to by-pass economic substance requirements".
Mauritius has efficient exchange of information mechanisms and 42 Double Taxation Avoidance Agreements (DTAAs) with other countries including India while seven Tax Information Exchange Agreements are in force.
Noting that it is a signatory to the IOSCO MMoU (Multilateral Memorandum of Understanding), FSC said Mauritius has always shared information with its Indian counterparts, either under information exchange agreements or voluntarily.
IOSCO (International Organisation of Securities Commissions) is a grouping of capital market regulators.

FSC Mauritius has a Memorandum of Understanding (MoU) with capital market watchdog Sebi since 2002.
"Mauritius has always been proactive and remains very committed to furthering transparency and substance in its financial centre," FSC said.