Courtesy DTAA - Mauritius continues being the favoured route for Investors :
India and Mauritius signed a Double Taxation Avoidance Agreement (DTAA) 26 years ago. That Mauritius currently accounts for nearly half of all foreign direct investment (FDI) inflows into India. DTAA provides/allows tax benefits for investments flowing from/through Mauritius .This special status accorded to investments from/through Mauritius came up for judicial review few years back. However the Supreme Court of India had refused to interfere and so the status quo continues.
On the flip side however, the said agreement with Mauritius is costing the Indian exchequer over INR 40 billion annually on account of the capital gains exemption for investors who route their funds through Mauritius to avail this benefit. To address the issue, the Indian government tried negotiating for an amendment in the DTAA. The idea was to move from a 'residence-based system of taxation' to a 'source-based' system. Under the proposed ‘source-based’ system, investors from Mauritius would need more than a ‘postbox’ registered office in Mauritius to qualify for the tax benefit.
However, it is reported that Mauritius has rejected India’s proposal for modifying the DTAA, despite India’s offer to compensate Mauritius for any loss of revenue resulting from changes in the existing agreement.
Therefore, as of now, Mauritius continues to be a favored route for FDI to India.
India and Mauritius signed a Double Taxation Avoidance Agreement (DTAA) 26 years ago. That Mauritius currently accounts for nearly half of all foreign direct investment (FDI) inflows into India. DTAA provides/allows tax benefits for investments flowing from/through Mauritius .This special status accorded to investments from/through Mauritius came up for judicial review few years back. However the Supreme Court of India had refused to interfere and so the status quo continues.
On the flip side however, the said agreement with Mauritius is costing the Indian exchequer over INR 40 billion annually on account of the capital gains exemption for investors who route their funds through Mauritius to avail this benefit. To address the issue, the Indian government tried negotiating for an amendment in the DTAA. The idea was to move from a 'residence-based system of taxation' to a 'source-based' system. Under the proposed ‘source-based’ system, investors from Mauritius would need more than a ‘postbox’ registered office in Mauritius to qualify for the tax benefit.
However, it is reported that Mauritius has rejected India’s proposal for modifying the DTAA, despite India’s offer to compensate Mauritius for any loss of revenue resulting from changes in the existing agreement.
Therefore, as of now, Mauritius continues to be a favored route for FDI to India.
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