Amidst efforts to soothe concern raised by Foreign Institutional Investors (FII), the Mauritius Government has assured that India’s concern on the Double Taxation Avoidance Convention (DTAC) with it will be fully addressed.
“We wish to reiterate that Mauritius is committed and willing to collaborate fully to address the concerns of the Indian side on the DTAC while ensuring that the treaty remains commercially viable. We are optimistic that both sides can conclude a mutually acceptable package that would yield a win-win solution,” a statement issued by Mauritius’ Ministry of Finance and Economic Development said.
This statement has come at a time when a provision related with Tax Residence Certificate (TRC) in the Finance Bill caused panic in the market. However, the situation improved after a clarification issued by the Finance Ministry on March 1.
Among other things, the clarification emphasised that investors from Mauritius will continue to get benefit as prescribed by a 13-year old circular. Nearly 40 per cent of investment comes from this island nation.
The tax treaty with Mauritius only talks about residence and not beneficial ownership. TRC is a kind of proof that an entity is registered with the tax authority of a particular country and liable to pay tax there.
The provision in the Finance Bill stated that certificate of being a resident in a specified territory outside India will be necessary but not a sufficient condition for claiming any relief under the agreement (DTAC which is also known as Double Taxation Avoidance Agreement or DTAA).
Meanwhile, the Mauritius Government said that it was comforted by the declaration of the Indian Finance Minister to the effect that India will not take unilateral action to revise the Mauritius-India DTAC. It also mentioned that India-Mauritius Joint Working Group met in December 2011 and again in August 2012 to discuss concerns on the operation of the India-Mauritius DTAC.
Mauritius has agreed with India on a Tax information Exchange Agreement, which incorporates provisions on assistance in the collection of taxes.
“The next meeting of the JWG is scheduled to take place in the last week of this month, in India. Mauritius has already proposed dates for the holding of the meeting and we are waiting for a confirmation from the Indian side regarding the dates,” it said.