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AfricaMoney | October 19, 2017

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India and Mauritius to meet soon to discuss changes to bilateral tax treaty

India and Mauritius to meet soon to discuss changes to bilateral tax treaty

FSC Chairman Rajeshsharma Ramloll had noted in July that a speedy resolution of Indo-Mauritius tax treaty issues is not only mutually beneficial for both nations, but would also bring respite to investors, boosting their confidence and ensuring certainty. (Image: Capital Online)

Mauritius’ Financial Services Commission (FSC) has said that the Indian Ocean Island is in discussions with India to make changes to the bilateral tax treaty, in order to address the Asian economy’s concerns that the island is being used by global investors as a tax haven.

It may be noted that the FSC is the premier regulator of all non-banking financial services and global business sectors in Mauritius.

Till date, negotiations to amend the Indo-Mauritius tax treaty are still going on, as the island seeks to allay India’s apprehensions that its shores are being misused for routing unaccounted money and evading taxes.

But, in the latest developments, a Joint Working Group, which has already held a few rounds of discussion on the tax treaty, is expected to meet later this month or early in October, said FSC CEO Clairette Ah-Hen.

“We will defend our stand point that Mauritius is not a tax haven in spite of certain misperceptions,” she stressed, talking to the Indian press.

FSC sought to set to rest India’s concerns that the jurisdiction is being used by Indian entities for round-tripping of funds, choosing to focus instead on the fact that the country provides stability and predictability for investors.

Incidentally, round-tripping refers to routing of India-bound investments through Mauritius, to take advantage of the tax treaty between the two countries, instead of global investors zooming in directly on the Asian economy.

The FSC CEO added that discussions are ongoing on the revised Double Taxation Avoidance Agreement (DTAA) or new tax information exchange agreement, and both countries have shown great interest in this regard.

Even though Mauritius has reiterated that it has a strict monitoring mechanism in place, investment flows between the two nations have been adversely impacted on the back of tax treaty concerns, and the long-drawn out negotiations.

However, the fact remains that despite the negotiations hanging fire, Mauritius remains one of the top sources of foreign direct investments into India.

Last fiscal, FDI from the island nation touched around USD 4.85 billion and the inflows from April to July 2014 were exceptionally robust, standing at USD 3.39 billion already in the year till date and showing that Mauritius has regained its lead as the top source of investments into the Asian economy.

Moving on, Ah-Hen added that the country is fully committed to adopt international norms and standards, stressing that Mauritius is recognised as a sound and credible international financial centre.

The FSC chief noted that the low-cost jurisdiction offers the predictability and stability which investors are looking for, making Mauritius a model for other jurisdiction in the region.

According to Ah-Hen, Mauritius has lower tax rates compared to many other countries as the island nation believes in simplified tax structure that encourage people to pay taxes and not indulge in tax evasion activities.

Ah-Hen added on a note of finality that, as a regulator, “we do not compromise on the fact that companies and our licensees must abide by the laws, regulations and rules.”

Earlier, this July, FSC Chairman Rajeshsharma Ramloll also noted that a speedy resolution of issues related to the Indo-Mauritius tax treaty is not only mutually beneficial for both nations, but that it would also bring respite to investors, boosting their confidence and ensuring certainty.

He highlighted that the island nation had already taken many steps to assuage Indian concerns, concluding that the island nation was an economical as well as an efficient route for making investments into India.

Source: Press Trust of India

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