Mauritius is not willing to impose a capital gains tax on investors registered in the country. The islands minister of foreign affairs Arvin Boolell today said his nation is putting in place stringent safeguards to make the country a transparent investment destination but at the same time stressed that the sacrosanctity of the clause relating to capital gains tax in the double taxation avoidance treaty (DTAA) be maintained.
Boolell,who is in the country to meet top functionaries of the government and gain clarity on recent Budget announcements,said his country is willing to renegotiate the treaty and put in place limitations of benefits clause,but the sacrosanctity of article 13 has to be highlighted. We need a commercially viable treaty that is predictable and conveys the full meaning of reliability, he told The Indian Express.
Raising concerns on the recent changes announced relating to general anti-avoidance rules (GAAR),the minister said,There has been a climate of uncertainty since the Budget announcement. The time has come to bring back certainty. We are willing to address issues through limitations of benefits clause in the treaty.
As per Article 13 of the DTAA,any capital gains earned in India by a Mauritian company is not taxable in India while the African nation levies no capital gains tax. This means the transaction is taxed neither here nor in Mauritius. Many investors have been taking advantage of this and have been round tripping though the Mauritian route. The misuse of treaty prompted talks of its renegotiation. India wants the issue of capital gains also to be discussed in the renegotiated treaty,which was entered into in 1983.
We have seen that measures can be taken but weigh on consequences India needs FDI,India needs to collect revenue at the end of the day both the countries need FDI, he said. The minister said that Mauritius has been working on putting in place stringent system and has been proactive in disclosing information,while it has enough safeguards to track the source of funds and the end beneficiary. Mauritius also has started stressing on weeding out shell companies and is sharing tax information with India.