Juristconsult Chambers is pleased to launch its second webcast which is this time on the Base Erosion Profit Shifting (BEPS).
Spear-headed by the OECD and endorsed by the G20, BEPS refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations, away from where the value is created. The primary objective of BEPS is to ensure that multinational corporates are paying their "fair share of taxes".

Under the inclusive framework which comprises of 15 action plans, over 100 countries and jurisdictions, including Mauritius, are working to implement the BEPS measures and tackle BEPS. The bold initiative aims at reorganising how global businesses are taxed. The webcast discusses the four most relevant actions plans for Mauritius namely

  • Action 6: About treaty abuse.
  • Action 2: About hybrid mismatches.
  • Action 3: About controlled foreign company rules.
  • Action 15: About the multilateral instrument.

The webcast includes exclusive interviews, conducted by Juristconsult's Head of Tax Johanne Hague, with the Head of the International Tax Practice and a Senior Associate at Nishith Desai Associates (Delhi), the Section Head – International Tax at the Mauritius Revenue Authority and the Chairman of the International Fiscal Association – Mauritius branch.



Hello and welcome to Juristconsult Chambers' second tax webcast. I'm Johanne Hague, Head of the tax practice. Today we are going to be talking about BEPS and its potential impact on Mauritius.

So what is BEPS? In a nutshell, the BEPS project is about preventing the shifting of profits from a high tax to a low-tax jurisdiction, away from where the value is created. The primary objective of the BEPS project is to ensure that multinational corporates are paying their "fair share of taxes". But the reality of the BEPS project is of course much more complex and technical than that.

The BEPS action plan is a huge project spear-headed by the OECD and endorsed by the G20, culminating in October 2015, in 15 action plans aimed at reorganising how global businesses are taxed.

However, let's not forget the "dark side" of BEPS. All the recommendations of the BEPS package are not necessarily best for the global economy. The package may have been drafted with tax in mind, but have all the consequential implications been examined? I'm not so sure. And of course let's not forget the eternal debate of the morality of taxation. Should we have a moral obligation to pay taxes even where it is legal not to do so? Are the good guys really the good guys?

So here we are. 15 reports totalling over 1600 pages of analysis and recommendations.

Although not designed primarily with offshore financial centres in mind, the BEPS project will undoubtedly have a significant impact on the global business industry in Mauritius. The extent of the collateral damage will depend on the implementation in practice of the action plans.

So which of these are most likely to affect Mauritius?

  • Action 6: Is about the treaty abuse. And as I'm sure you're aware, this is a very sensitive issue for Mauritius, especially in the India context.
  • Action 2: Is about hybrid mismatches. These concerns arrangements which result in double non-taxation. For example where an item is considered as a dividend in one country and interest in another.
  • Action 3: controlled foreign company rules. These rules are about taxing profits of subsidiaries located in low-tax jurisdictions even where the profits aren't repatriated. Mauritius could be seen as a CFC jurisdiction because of our deemed foreign tax credit rules.
  • Action 15: Is the famous – and unprecedented – multilateral instrument that is currently being negotiated by many countries, including Mauritius.

We will be exploring some of the issues arising from the action plans in this webcast. So sit back and enjoy.

* * *

Questions to Rajesh Simhan & Meyyappan Nagappan of Nishith Desai Associates'

  1. The Indian budget proposals for 2016-2017 were announced at the end of February. I really liked the way NDA summarised the budget "worth an oscar or two but not a clean sweep". One area of continuing uncertainty is the retrospective tax on indirect transfers. Once again, the Indian budget did not address the question head on and proposes a solution that only seems to be helping the Indian tax authorities tax more quickly rather than going to the crux of the issue. Why the constant delay and deferral?
  2. Two items of the Indian budget that stem out of the BEPS package is the equalisation levy on online advertising fees to non-residents and country by country reporting. Did you expect more of BEPS to come out on this year's budget?
  3. Is India participating in the negotiation of the OECD's multilateral instrument (Action 15 of the BEPS package)? What is the expectation in the market? LOB or PPT or both? How will this fit in with the application of the GAAR from next year?
  4. The last round of treaty negotiations between India and Mauritius in March was not a great success and no agreement was reached. In your experience, do investors continue to use Mauritius as a platform in India or is there a preference for Singapore which has a treaty with India with a LOB clause.

Questions to Yamini Rangasamy of Mauritius Revenue Authority

  1. The negotiation of a multilateral instrument modifying bilateral tax treaty is unprecedented in the international tax field. I think it's fair to say that such a colossal project is bound to encounter some technical challenges. One possible mechanism under the Multilateral Instrument(MLI) is asymmetrical application of the provisions. What are your views on the matter?
  2. The MLI is expected to modify existing treaties. On the assumption that the MLI is signed by Mauritius, will consolidated versions of existing bilateral treaties be produced? How will this be done in practice?

Questions Rajesh Ramloll of International Fiscal Association, Mauritius Branch

  1. The reports on the BEPS action plan published by the MRA are prefaced with the following statement « In 2016 OECD and G20 countries will conceive an inclusive framework for monitoring, with all interested countries participating on an equal footing ». One of the main criticisms of the BEPS package is that it has been conceived by a group of developed countries for the benefit of developed countries, and therefore does not necessarily have the best interests of developing countries at heart. Is Mauritius involved in the development and implementation of the BEPS package?
  2. Do you think that the implementation of the BEPS package, and in particular Action 6, would negatively impact the global business industry in Mauritius?

* * *

Thank you again to all our guest speakers today for having taken the time to discuss BEPS. I'm sure there will be more opportunities to discuss BEPS as things evolve throughout the year.

This is it for today's webcast. We hope you've enjoyed it. As always, please don't hesitate to reach out to us if you have any BEPS or other tax related queries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.