Finally, after about 33 years of the India-Mauritius tax treaty coming into force, the treaty has now been amended. What is the key feature of the amendment?. Recent news of India and Mauritius signing a Protocol to amend their 33 year old tax treaty caused seismic changes in the tax world. Though not completely. India and Mauritius have concluded negotiations with respect to the double tax avoidance agreement (India-Mauritius DTAA) between the two countries.
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Paragraph 4 deals with taxation of capital gains arising from the alienation of any property other than those mentioned in the preceding paragraphs and gives the right of taxation of capital gains only to that State of which the person deriving the capital gains is a resident. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State. For the purpose of paragraph 1″approved institution” means an institution which has been approved in this regard by the competent authority of the concerned Contracting State.
Gains from the alienation of immovable property, as defined in paragraph 2 of article 6, may be taxed in the Contracting State in which such property is situated. Nothing in this Article shall be construed as creating or providing any right to such proceedings before any court or administrative body of the other Contracting State. Therefore, any resident of Mauritius deriving income from alienation of shares of Indian companies will be liable to capital gains tax only in Mauritius as per Mauritius tax law and will not have any capital gains tax liability in India.
Have agreed as follows:.
In the application of the provisions of this Convention by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the laws in force of that Contracting State relating to the areas which are the subject of this Convention. For the purposes of the credit referred to in paragraph muritius the term “Mauritius tax payable” shall be deemed to include any amount which would have been payable as Mauritius tax for any year but for an exemption or ,auritius of tax granted for that year or any part thereof under:.
These amendments will shift taxing rights arising on capital gains from Mauritius to India. In no case shall the provisions of this Article be construed so as to impose on a Contracting State the obligation: The provisions of Article 1, 2, 3, 5 and 8 of the Protocol shall have effect:.
For the purposes of this Convention, unless the context otherwise requires:.
Notwithstanding the provisions of paragraphs 3 and 4, a revenue claim accepted by a Contracting State for purposes of paragraph 3 or 4 shall not, in that State, be subject to the time limits or accorded any priority applicable to a revenue claim under the laws of that State by reason of its nature as such. Choose your reason below and click on the Report button.
Desiring to amend the Convention between the Government of the Republic of India and the Government of Mauritius for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains, and for the encouragement of mutual trade and investment, signed at Port Louis on 24 th August, hereinafter referred to as “the Convention”.
Never miss a great news story! The competent authorities of the Contracting States shall exchange such information or document as is necessary for carrying out the provisions of this Convention or for prevention data evasion of taxes which are the subject of this Convention.
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Interest shall be deemed to arise in a Contracting State when the payer is that Contracting State itself, a political sub-division, a local authority or a resident of that State. This Convention shall also apply to any identical or substantially maritius taxes which are imposed by either Contracting State after the date of signature of the present Convention in addition to, or in place of, the existing taxes referred to in paragraph 1 of this article.
The investment strategy between the two long-term investment partners must now be revisited because of the introduction of GAAR and due to the amendments in the DTAA, both effective from 1 April Conclusion All Treaties are prone to readjustments from time to time, and the Mauritius-Indian treaty was due a facelift. However, such royalties may also be taxed in the Contracting State in which they arise, and according to the law of that State, but the tax so charged shall inia exceed 15 per cent of the gross amount of the royalties.
This reverses the previous position on taxation of such incomes and gives India the ability to tax capital gains arising on or after April 1,that arise from the sale of shares of an Indian entity. The fact that a company, which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other Mauditius State whether through a permanent establishment or otherwise shall not, of itself, constitute either company a permanent establishment of the other.
Where a resident of a Contracting State considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with this Convention, he may, notwithstanding the remedies provided by the national laws of those States, present his case to the competent authority of the Contracting State of which he is a resident.
For Further Details Contact: The effect of the protocol that has been signed by the two countries is to remove the residence based taxation regime for capital gains and replace it with a source based regime. The provisions of Article 4 of this Protocol shall have effect in both Contracting States for assessment year and subsequent assessment years. During a visit to Mauritius, Prime Minister Modi raised the question of treaty re-negotiation.
The protocol gives India the right to tax capital gains on transfer of Indian shares acquired on or after 1 April This Circular was mwuritius clear enunciation of the provisions contained in the DTAC, which would have overriding effect over the provisions of sections 4 and 5 of the Income-tax Act, by virtue of section 90 1 of the Act A professor, teacher and research scholar who is or was a resident of one of the Contracting States immediately before visiting the other Contracting State at the invitation of that other Contracting State or of a university, college, school or indiq approved institution in that other Mauritihs State for the purpose of teaching or engaging in research, or both, at the university, college, school or other approved institution, shall be exempt from tax in that other Contracting State on any remuneration for such teaching or research for a period not exceeding two years from the date of his arrival in that other Contracting State.
In no invia shall the provisions of paragraph 3 be construed to permit a Contracting State to decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person.
When a revenue claim of a Contracting State is enforceable under the laws of that State and is owed by a person who, at that time, cannot, under the laws of that State, prevent its collection, that revenue claim shall, at the request of the competent authority of that State, be accepted for purposes of collection by the competent authority of the other Contracting State.
Interest arising in a Contracting State shall be exempt from tax in that State provided it is derived and beneficially owned by:.
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Video Slideshow Audio Twinterview. Ctaa per the information available, the benefit of the reduced tax rates will be available to those Mauritius entities who:.
India-Mauritius tax treaty: An end and a new beginning
Prior to its omission, said sub-paragraph read as under: Notwithstanding the provisions of paragraph 2 of this article, gains from the alienation of ships and inddia operated in international traffic and movable property pertaining to the operation of such ships and aircraft, shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated.
Dtaaa people with knowledge of communications between Delhi and Port Louis, on condition of anonymity, separately said talks to upgrade the DTAA will start soon.
No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise. Capital Gains on sale of shares in Indian company to be taxable in India As per the existing tax treaty, in particularly article 13 4 of the India-Mauritius DTAA, the capital gains arising from the sale of shares of an Indian company were taxable only in Mauritius.
However for all new debts and loans created after 31 st March such incomes shall be subject to withholding tax in India at the rate of 7.