Issues Pertaining to the Indo-Mauritius Double Taxation Avoidance Convention

Position of the Mauritius Ministry of Finance on the following:

1. Changes to the Indo – Mauritius Double Taxation Avoidance Convention

The India-Mauritius Joint Working Group (see note 1 below) met in December 2011, and in that context India has proposed certain changes to the Double Taxation Avoidance Convention

We have listened attentively to the concerns expressed by the Indian side and we are willing, as part of an all-inclusive package, to consider changes to the treaty that would address the Indian concerns, while ensuring that the changes do not affect the mutually beneficial effect of the treaty. Concrete proposals have been made to India. We are optimistic that both sides can conclude a mutually acceptable package that would yield a win-win outcome for both parties.

We would also like to emphasise that Mauritius is a jurisdiction of substance, it has a full‐fledged regulator (the Financial Services Commission) that oversees our global business sector, and it has adopted the necessary applicable and appropriate norms, standards and best practices set by International Bodies, such as the OECD, the Basel Committee on Banking Supervision, the International Association of Insurance Supervisors and the International Organisation of Securities Commissions, etc. Mauritius requires substance which many other jurisdictions do not:

- First, there is a requirement for Global Business Companies (GBCs) to be set up and administered by licensed Management Companies,

- Second, there is a requirement for GBCs to have resident directors,

- Third, there is a requirement for Board meetings to be held in Mauritius, and

- Fourth, there is a requirement for banking transactions to be routed through Mauritius.

2. Reports that clients are being advised to change their base for investments into India

If this is the case, we consider that the investors are being ill‐advised. Firstly, the Indian parliament has not yet concluded its discussions on the budget proposals. Secondly, you would have observed in the Indian press a declaration from an Official of the Ministry of Finance to the effect that the budgetary provisions will not impact upon the issue of Tax Residency Certificate delivered by Mauritius. In effect, there is no clarity as yet on the outcome of the proposals made in the budget. Thirdly, Mauritius is currently engaged in a discussion with the Indian authorities and proposals have already been made in respect of the Treaty. We expect the Joint Working Group to meet anew in the near future to take forward these proposals. Government is confident that agreement will be reached on a workable solution for both parties that will bring certainty and stability in the market and which will then prevail.

Also, investors should bear in mind that it would cost much less to operate from Mauritius and that Mauritius is being used as a platform for investment into India not only because of the DTAC (other countries have the same provisions on capital gains with India) but also because of the quality of the service, its pool of professionals, the quality of its regulatory framework, geographical proximity, cultural affinities and long historical ties between India and Mauritius amongst others.

Mauritius is the main provider of FDI to India and also the preferred jurisdiction for Indian outward investments into Africa now. We believe that this should remain so. Why? It is a model that works, which has served and continues to serve the interests of both India and Mauritius and it does not make business sense to change a winning formula.

3. The general anti‐avoidance rule proposed by India

The law is still being discussed in the Indian Parliament. Any decision now might be premature.

However, we are concerned that in its current form the new law is likely to create much uncertainty for foreign investments.

It is a matter that we will surely discuss with our Indian counterparts at the next meeting of the JWG so that there is both certainty and stability for cross‐border investments to take place.

4. Mauritius platform for investments into Africa

Our Africa strategy is complementary to the one regarding Asia, including India and China, rather than a loss‐compensating initiative. The making of Mauritius as the ideal platform for investments into Africa actually fits within our development strategy of transforming the country into a services hub.

Africa now offers immense opportunities to investors be it in the mining industry, construction industry, telecommunications, software and IT services or manufacturing, etc and Mauritius has become the preferred platform for routing these investments into Africa. In fact, Development Financial Institutions favors Mauritius as the natural domicile for their investments in Africa

We believe that Mauritius is the ideal gateway for the structuring of investments into Africa for a number of reasons, including the following:

• our close cultural, business and bilateral ties with Africa;

• our business friendly legislation and government committed to growth of international business /businesses registered within 2 – 3 days;

• our robust banking system – regulated by the Bank of Mauritius / all major international banks present in Mauritius;

• our pool of highly qualified and bilingual professionals / bilingualism eases communication with French Speaking Africa;

• Mauritius is the only international financial services center that is member to all major African regional organizations (COMESA, SADC, African Union, IOR – ARC); and

• our network of Double Taxation Avoidance Agreements (13 Treaties with African countries) and Investment Promotion and Protection Agreements with African countries

NOTE 1: The Mauritius – India Joint Working Group

In 2006, India and Mauritius agreed to establish a Joint Working Group (JWG) to provide a platform to discuss concerns arising from the operation of the India‐ Mauritius Double Taxation Avoidance Convention (DTAC).

Over the years Mauritius has taken several measures to address the concerns that have been expressed by the Indian authorities at the JWG meetings. We have gone the extra mile agreeing to the stationing of an officer from the Revenue Department of India at the High Commission of India in Port Louis for better exchange of information. Other measures taken by Mauritius include the following:

• stringent licensing conditions have been introduced to ensure that Indian-sourced funds are not re-invested in India through Mauritius and thus to prevent round-tripping;

• Indian auditors have been allowed to practice in Mauritius – Global Business Companies investing in India may use the services of Indian auditors to have their accounts audited for Mauritian regulatory purposes;

• Mauritius law has been amended to provide for wider Exchange of Information with Indian authorities. A Mutual Assistance in Criminal and Related Matters Act has been introduced and provides for requests for judicial assistance, notwithstanding the confidentiality provisions that apply to Global Business Companies;

• the Mauritius Financial Services Commission (FSC) has signed an MOU with the Securities and Exchange Board of India (SEBI) providing for exchange of information; and

• we have also agreed, as requested by the Indian authorities, to issue Tax Residence Certificates (TRCs) on an annual basis, upon the recommendation of the FSC which will supervise full compliance with the undertakings provided by applicants for the TRC.