Mauritius: Tighter norms for global business companies to benefit economy
The FSC and SEBI (India’s capital markets regulator) have been exchanging information for years, said FSC chairperson Marc Hein.
It increasingly appears that it is not just to appease a suspicious India, but that Mauritius truly believes that imposing ‘substance requirements’ on global business companies will generate more on-the-ground business opportunities for the island economy.
Financial Services Commission (FSC)’s chairperson Marc Hein said that the additional requirements being imposed on global business category-1 (GBC-1) companies will lead to the creation of more economic nexus between those companies and the island economy.
Hein, who was in India for an international taxation conference, said these companies would now “interact more with our economy, provide more jobs to our people, rent more offices, spend more money and indeed keep on paying more taxes.”
The FSC, which is Mauritius’ integrated financial sector regulator, has put in place ‘greater substance requirements’ for global business companies operating from its jurisdiction, to ensure their substantial presence there, and not just a ‘proxy address’ to benefit from tax treaties with India and other nations.
Most global investors use the GBC-1 route to make investments into India and other countries through Mauritius.
Mauritius has also agreed to include a limitation of benefits (LOB) clause in its revised tax treaty with India, which are typically aimed at preventing ‘treaty shopping’ or inappropriate use of tax pacts by third-country investors.
Besides, a Tax Information and Exchange Agreement between India and Mauritius has been finalised.
The uncertainty over the bilateral tax treaty has led to India’s share in the number of investments made by global companies through Mauritius having almost halved in the past two years, even as Africa’s share has surged significantly.
According to figures compiled by FSC, the share in the number of investments made by global business companies into India slumped to 15.9% in 2012 from an all-time high of 32.3% in 2010.
“A few years back, Mauritius was largely dependent on the Indian market but the African strategy adopted showed positive results,” FSC had said in its latest annual report for 2012.
“A large part of investment is now directed towards Africa, thus reducing the dependence on India. Such a result reveals not only the market is now diversifying but also that investment has increased,” the report adds.
In a recognition of the island economy’s efforts for greater economic substance, Mauritius was listed as “largely compliant” with global tax laws by Paris-based Organisation for Economic Cooperation and Development (OECD), in a world-wide survey covering 50 jurisdictions released last month.
Source: Press Trust of India