Mauritius Amends Tax Treaty with India to Enhance Investment and Economic Cooperation
Agreement to Avoid Double Taxation
On March 7, 2024, India and Mauritius inked an amendment to their Double Taxation Avoidance Agreement (DTAA), marking a significant step toward strengthening economic ties and boosting investment flows between the two nations.
Key Amendment Provisions
The revised treaty introduces several key provisions, including:
* An expanded definition of "business profits" to ensure that the treaty covers the full range of commercial activities conducted between the two countries. * A 5% withholding tax on dividends derived from Mauritian companies by Indian residents, aimed at preventing tax evasion and fostering transparency. * The inclusion of a "principal purpose test" to prevent the treaty from being used to avoid taxes through illegitimate means. * The elevation of the treaty to a "Comprehensive Economic Cooperation and Partnership Agreement (CECPA)", further enhancing bilateral cooperation and economic integration.Benefits for Both Countries
The amended treaty offers substantial benefits for both India and Mauritius:
* For India, it addresses concerns about potential tax avoidance through Mauritius-based entities and generates additional revenue. * For Mauritius, it strengthens its reputation as a reputable international financial center and attracts foreign investment in key sectors.Announcement and Impact
The amendment was formally signed in Port Louis on March 7, 2024, and made public by the Income Tax Department on April 12. The revised treaty is expected to come into effect shortly, providing businesses and individuals with greater clarity and predictability in their cross-border transactions.
Conclusion
The amended India-Mauritius tax treaty signals a new era of economic cooperation between the two countries. It promotes investment, encourages fair taxation, and enhances transparency, ultimately fostering a more conducive and prosperous business environment for both nations.
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