ARTICLE
17 April 2024

Mauritius And India Signed New Tax Treaty Protocol

TS
The Sovereign Group

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Sovereign began in Gibraltar in 1987 and has since grown into one of the largest independent corporate and trust service providers in the world. We currently manage over 20,000 clients that include companies, entrepreneurs, private investors or high net worth individuals and their families – and have assets under administration in excess of US$10 billion.
The governments of India and Mauritius signed, on 13 March, a second amending protocol to the 1982 double tax agreement (DTA) between the two countries...
India Tax
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The governments of India and Mauritius signed, on 13 March, a second amending protocol to the 1982 double tax agreement (DTA) between the two countries to align it with the minimum standards under the OECD Base Erosion Profit Sharing (BEPS) initiative. It will enter into force when ratified by both treaty partners.

Mauritius signed the Multilateral Convention to implement the Tax Treaty Related Measures to prevent Base Erosion and Profit Shifting (MLI) in 2017, which seeks to preserve the role of bilateral DTAs in eliminating double taxation worldwide, while combating opportunities for businesses to use treaties to eliminate all tax liability or to reduce tax rates to aggressively low levels.

The MLI only applies to tax treaties that are 'Covered Tax Agreements' (CTAs). The new protocol to the India-Mauritius DTA is therefore designed to raise it to the status of a CTA under the MLI. Under this framework, countries are required to include both a 'limitation on benefits' (LOB) rule and a 'principal-purpose test' (PPT) rule in their treaties.

The inclusion of these two rules will be supplemented by a mechanism that deals with conduit arrangements, such as a restricted PPT rule applicable to conduit financing arrangements in which an entity otherwise entitled to treaty benefits acts as a conduit for payments to third-country investors.

Mauritius and India also signed a Memorandum of Understanding (MoU) between the International Financial Services Centres Authority (IFSCA) and the Financial Services Commission of Mauritius, to promote cooperation in the financial services sector between the Gujarat International Finance Tech-city (GIFT) Special Economic Zone and FSC Mauritius.

GIFT is being developed as a global financial services hub and offers companies that set up there a 10-year tax break and does not charge taxes on transfer of funds from overseas jurisdictions. Over 80 fund managers with commitments of USD30 billion and investments of over USD2.93 billion have been set up in GIFT City in the last three years, according to IFSCA.

The objective of the MoU is to facilitate the sharing of knowledge and best practices on the development, regulation and supervision of the financial markets of the respective jurisdictions, as well as to promote and secure the fitness and propriety of licensed or registered persons and to promote high standards and integrity in conduct of business.

The MoU will also facilitate the enforcement of laws, rules, and regulations governing financial products, financial services and financial institutions within their respective jurisdictions. It also the sharing of information concerning the application of technologies, innovation, fintech and regtech within the financial ecosystem for the development of financial markets in the respective jurisdictions.

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.

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