India looks to amend tax pact with Mauritius to prevent tax evasion

tax

New Delhi: India is in talks with Mauritius to amend the tax treaty between the countries to prevent its abuse for tax evasion, Akhilesh Ranjan, joint secretary in the income-tax department, said on Thursday.

He did not rule out that India is seeking the right to levy capital gains tax.

India has been trying to renegotiate the tax pact with Mauritius for the past few years to check so-called round tripping and other treaty abuses. Round tripping entails moving money out of one country into another, and getting it back under the garb of foreign capital.

Under the bilateral agreement between the two countries at present, capital gains from the sale of securities can be taxed only in Mauritius. Capital gains tax is close to zero in Mauritius and consequently almost 40% of investments into India come through that country.

After prolonged negotiations, Mauritius has agreed to include a limitation of benefit clause, similar to the one in the treaty between Singapore and India. The accord with Singapore stipulates that only those companies that spend a minimum of $200,000 in Singapore can avail the benefits of the treaty.

When asked if India is seeking the right to levy capital gains tax in the amended treaty, Ranjan, who also represents India on all international tax matters, said, “That’s all part of the issues that we are discussing and a best possible solution will be arrived at.”

He was addressing a press conference on the sidelines of a conference on global automatic exchange of information hosted by the Indian government.

“Talks with Mauritius have been ongoing. They have some issues that have been sorted out. Some issues still have to be sorted out. We are looking at ways and means to ensure that tax treaties are not abused for tax avoidance,” he said.

He, however, declined to give a timeline for the conclusion of the negotiations that have been going on for almost 10 years now.

Ref : http://www.livemint.com/Politics/UgzeZuXQq2fuNmOWC09aYN/India-looks-to-amend-tax-pact-with-Mauritius-to-prevent-tax.html

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