Mauritius: Changes in the tax treaty with India, what this means for investors
Mauritius The Double Taxation Avoidance Agreement (DTAA) with Mauritius has been amended. The new protocol gives India the right to tax capital gains arising from the sale or transfer of shares of an Indian company acquired by a Mauritian tax resident. Investments made before 1 April 2017 are exempt and shares acquired between 1 April 2017 and 31 March 2019 will attract capital gains tax at a 50% discount on the Indian tax rate — ie at 7.5% for listed equities and 20% for unlisted. The full tax impact of the protocol will fall on investments beginning 1 April 2019, when capital gains will attract tax at the full Indian domestic rates of 15% and 40%. The full impact of the new protocol will be felt on investments starting 1 April 2019, when capital gains will attract tax at the full rates of 15% and 40% The DTAA is a major reason for a large number of foreign portfolio investors (FPI) and foreign entities to route their investments in India through Mauritius. Between April 2000 and December 2015, Mauritius accounted for fully USD93.6 billion — or 33.7% — of the total foreign direct investment. Why amend the Treaty? Simply put, to put the brakes on round-tripping, boost anti-money laundering initiatives and raise tax revenue. It is also expected to discourage speculators which the government expects will reduce volatility in the market. Impact on investments routed through Singapore? Singapore has emerged as the more favoured investment route recently. The terms of the Singapore-India DTA however mean that it is expected that the amended tax regime for Mauritius will be applicable to capital gains for Singapore tax residents too. Intuitively it feels