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Indo-Mauritius Tax Treaty: Big Changes?

Published on Tue, Jul 14,2015 | 18:52, Updated at Tue, Jul 14 at 18:52Source : CNBC-TV18 |   Watch Video :

Mauritius’ former finance minister claims that his country has given up the right to tax capital gains. This has raised questions regarding the scope of the renegotiation of the India-Mauritius Double Tax Avoidance Treaty (DTAA). CNBC TV18’s Menaka Doshi reports…

The former finance minister of Mauritius says the renegotiated tax treaty with India will have devastating effect on Mauritius.   He claims his country has given up the right to tax capital gains. This has raised questions regarding the scope of the renegotiation of the India-Mauritius Double Tax Avoidance Treaty (DTAA).

We have known for a while that the treaty is being re-negotiated. India has for long wanted a Limitation Of Benefits clause, like the one in the India-Singapore CECA. But Mauritius media reports suggest the re-negotiation goes far deeper. A story by La Defi Media Group quotes the former finance minister of Mauritius – Rama Sithanen. He is quoted as saying, “I am deeply shocked. The memorandum of understanding reached between India and Mauritius announced the end of the success of our financial sector.” He said: “It is incomprehensible that Mauritius has agreed to amend article 13 of the double taxation avoidance agreement with India.  Mauritius will no longer have the right to charge the capital gains tax.” “The protocol will have a devastating effect on Mauritius. In a few years, growth will experience a rapid decline. Part of the offshore sector will disappear”   

Article 13 is the article that determines levy of capital gains tax   It is not clear how Sithanen arrived at this conclusion. In another article he says he has come to know of this via “detailed research and discussion with many stakeholders”.   

Meanwhile Mauritius media has also carried reactions of current government officials. Roshi Bhadain, Minister of Financial Services in Mauritius has denied Sithanen’s information. Bhadain has been quoted to say that “Investors have nothing to fear and that the new agreement opens up more opportunities in the sector”   

It’s not clear if Sithanen is right about the information he has. Also our information has been drawn from online media. But the Indian tax fraternity is abuzz with this and I thought it would be useful to bring to your attention.

 
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