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Mauritius Closer to Granting India Double Taxation Loophole Wishes

Mauritius Closer to Granting India Double Taxation Loophole Wishes

From Live Mint

It is doing so by laying down rules for companies which would require them, among other things, to create a tangible business structure, and not just a company on paper.The move comes at a time when the Indian government has expressed its reservations about companies routing their investments through Mauritius to reduce the tax burden.

In an amendment in the Guide to Global Business, the Financial Services Commission (FSC), which regulates financial services except banking and global business in the country, has introduced stricter regulations, including guidelines that will determine if management and control of a company is from the island nation. It has also listed minimum expenditure and asset requirements for such companies.

The amendments suggest that listing on the local stock exchange could be one of the ways of meeting so-called economic substance requirements.
According to Mukesh Butani, chairman of BMR Advisors, Mauritius is trying to address India’s concerns and ensure that taxpayers benefiting from the treaty are not affected by the strict provisions of Indian tax authorities.

“Investors are considering whether they should move to other jurisdictions,” he said. “Mauritius is in a way preparing for GAAR (general anti-avoidance rules that will be implemented from April 2015),” Butani said.

With the introduction of GAAR, foreign institutional investors availing the benefits under the treaty will come under the Indian tax department’s scrutiny.

Mauritius said companies will have to comply with these so-called “economic substance” norms to obtain a tax residency certificate (TRC),which is a precondition for availing the benefits under the India-Mauritius pact. As per Circular 789 issued in 2000 by India’s Central Board of Direct Taxes, the TRC issued by the Mauritius Revenue Authority is sufficient evidence for claiming tax treaty benefits.

Read more at livemint.com