What are the implications of India regaining taxation rights on investments made through Mauritius?
Rebecca Abraham reports
On 10 May, when it was announced that India was to regain the right to tax capital gains on investments made through Mauritius, India’s ministry of finance said the move would “curb revenue loss, prevent double non-taxation” and help “curb tax evasion and tax avoidance”.
None of this will have come as a surprise as there have long been calls to amend the India-Mauritius double taxation avoidance agreement (DTAA) signed in August 1982. Allegations of treaty abuse and round-tripping have increasingly marked the discourse between both countries, and India has been working to tighten up the agreement since around 2001.
In Mauritius, the signing of the protocol to amend the DTAA was acknowledged to bring an end to the uncertainty that prompted investors to vote with their feet. Reports say the share of Mauritius in foreign direct investment (FDI) going into equity in India halved from 42% in 2012 to 21% in 2015, while that going into Singapore almost quadrupled in the same period.
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