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  3. Mauritius to include a clause in double taxation avoidance agreement to plug loopholes

Mauritius to include a clause in double taxation avoidance agreement to plug loopholes

08 Jul 2013 Evaluate

In order to plug loopholes to allay India's concerns over the misuse of the double taxation avoidance agreement (DTAA), Mauritius, the nation from where India receives maximum foreign investments, has proposed to include a clause in the treaty to ensure only genuine investors from the island nation enjoy tax benefits.

Mauritius Minister of Foreign Affairs, Regional Integration and International Trade, Arvin Boolell said that Mauritius has put in place all necessary precautions, all necessary checks and balances to plug loopholes in DTAA. He said that the country had submitted proposals for insertion of limitation of benefit clause adding that the treaty should be responsive to the needs of both countries. Mauritius has submitted the proposals at the last joint working group in Delhi in March 2013. Now, the country is willing to insert an appropriate clause in the treaty to prevent any perceived abuse and to insure that there will no changes to the Article 13 of DTAA, which deals with the capital gains. The move will restrict the treaty benefit to only those investors that meet the conditions specified in the clause.

There have been concerns that Mauritius is being used for money laundering and round tripping of illicit funds as it accounts for almost half of the foreign money coming into India. The investors from the US, Europe and other places tend to route their capital flows into India through this Indian Ocean country to benefit from a favorable tax treaty and the ease of doing business here. Recently, Mauritius based entities also came to light in some cases of corruption and alleged tax evasion, which were suspected to have been set up by Indian entities to dodge the tax authorities in India.

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