Sushil Khushiram: The India Tax Treaty Amendment

The signature of an amending protocol to the India-Mauritius tax treaty has brought to a close a long and arduous process of negotiations between the countries, spanning over two decades.

Excerpts:

“The terms of the Treaty Protocol amendment are widely at variance with the official line taken by the Mauritian authorities in negotiations until last year. Mauritius was willing to make two concessions, namely (i) to adopt a LOB, provided that capital gains tax exemption, termed as “sacrosanct”, is maintained, and that GAAR does not override Treaty provisions, and (ii) to accept a main purpose test for the interest clause. Mauritius was also agreeable to the latest revised standard of an automatic exchange of information...”

“Global business and related activities are estimated to account for up to 5% of GDP, of which Indian treaty business represents at least two thirds, or a value added of about Rs13 bn annually. To sustain global business sector growth in the event of declining share investments, it is hoped that Mauritius can transmute into a debt-based jurisdiction. A new avenue for debt-related investments into India could emerge on the strength of the broadened interest clause in the amended treaty, and of the continuing capital gains tax exemption on debt instruments...”

Mauritius Times