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India-Mauritius
tax treaty may be reviewed
Foreign
Investors routing their investments through Mauritius may face
the brunt once again. There is yet another twist in the India-Mauritius
("I-M") tax treaty saga. India has proposed a re-negotiation
of the existing I-M tax treaty as part of the ensuing negotiations
on the I-M Comprehensive Economic Co-operation Agreement ("CECA")
so as to include safeguards against third country residents from
enjoying the I-M tax treaty benefits. The Government of Mauritius,
however, has not yet responded to this issue.
India
has informed Mauritius that all aspects of the CECA pertaining
to preferential trade agreement, free trade agreement, tax treaty,
customs co-operation agreement and investment protection agreement
should be taken up for discussion soon. If Mauritius agrees to
the re-negotiation of the tax treaty with India, India may push
to incorporate the "limitation on benefits" clause in the I-M
tax treaty to check the usage of conduit companies for claiming
treaty benefits.The
recently amended India-Singapore tax treaty provides for a limited
version of "limitation on benefits" clause.
It
remains to be seen whether Mauritius would agree to renegotiate
the tax treaty and consent to the inclusion of "limitation on
benefits" clause along the lines of the India-Singapore tax treaty,
if not a comprehensive one. In any case, this process would involve
several rounds of negotiations and even if the I-M tax treaty
is amended, it should come into effect only prospectively.
Source:
Economic Times - August 20, 2005
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