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AfricaMoney | June 26, 2017

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South Africa & Mauritius sign MOU for revised tax treaty to be effective from 2016

South Africa & Mauritius sign MOU for revised tax treaty to be effective from 2016

The Double Tax Avoidance Agreement between South Africa and Mauritius is likely to come into effect from 1 January 2016 onwards; thus, the Mauritian international financial center is set to register steady growth with the new treaty on avoiding fiscal double taxation with South Africa to add to that of India.(Image:kpmg.com) 

The revised Double Tax Avoidance Agreement (DTAA) between South Africa and Mauritius is likely to come into effect on 1 January 2016, following the signing of a Memorandum of Understanding (MOU) between the two countries on 22 May 2015.

All that remains to bring the treaty into effect is the completion of relevant Mauritian domestic procedures and exchange of a diplomatic instrument of ratification.

If the process is completed by Mauritius before the close of this year, as is expected following pressure from South Africa, the treaty will come into effect as of 1 January 2016.

The Mauritian international financial center is thus set to register steady growth with this new treaty to avoid fiscal double taxation with South Africa, which wil add to that of India, accelerating the pace of activities in the offshore centre of Mauritius.

The agreement with South Africa takes some cues from India, hinging on the fact that the new South African treaty will allow a considerable increase of the activities in the Mauritian offshore.

It goes without saying that the interest displayed by powerful South African companies to establish in Mauritius is dependent on the situation prevailing in South Africa, with the second  largest economy in the continent having suffered from severe power cuts recently, impacting its mining activities.
Besides, with South African companies homing in on Mauritius, the real estate sector of the island economy is likely to see steady growth. It is an established fact that South Africa invests massively in the luxury residential projects segment of Mauritius.

From January 2008 till December 2014, the flows amounted to Rs 14,34 billion, and now, South African investments to Africa via Mauritius are poised to grow further. However, those towards India were uneven, with competitors hailing largely from Singapore.

The tax treaty, initially signed with India in 1983, allowed the Mauritian financial center to play the world card and to allow big international brands in the financial world to establish themselves on the island to take advantage of a beneficial tax regime in terms of profits of their investments in India.

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