This story is from August 29, 2006

India relooks at taxation treaty with Mauritius

TNN / Aug 29, 2006, 03:49 IST

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India and Mauritius initiated a high-level review of the double taxation avoidance treaty, which helps companies to escape the tax net.

India relooks at taxation treaty with Mauritius

NEW DELHI: India and Mauritius on Monday initiated a high-level review of the double taxation avoidance treaty, which New Delhi says helps many companies to escape the tax net.
During a ministerial-level, India is learnt to have pitched for restricting benefits to only those companies which have invested beyond a certain threshold in Mauritius and have had a presence in that nation for a considerable period of time.
Besides, it wants Mauritius to increase the flow of information beyond the know-your-customer norms, which was agreed upon a few years ago as part of a clampdown on post box companies that had no presence in the country but merely set up an entity to avoid paying taxes in India.
Mauritius is the largest source of FDI for India and concerns have been voiced by regulators like Sebi and RBI over FIIs using the country which has ethnic links with India. In fact, there are instances of round tripping of investment by Indian companies too which set up a company in Mauritius and invest in India through the foreign entity.

The inclusion of new norms is in line with similar clauses inserted in a DTAA with Singapore, which too wants the pact to be reworked on the lines of Mauritius. While agreements with other countries like Cyprus also have clauses similar to Mauritius, companies have preferred the country with high population of Indian origin due to easy norms for registration.
The changes in the India-Mauritius DTAA have been in the offing for a number of years but New Delhi had limited success. It was proposed to be linked to a bilateral trade agreement but then the option was put off as India did not want to put undue pressure citing strong diplomatic and political ties.

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