The amendments to the double taxation avoidance settlement between India and Mauritius are aimed toward dissuading tax avoidance, consider specialists, however word that there stay some areas of ambiguity, particularly as regards to its applicability.
“The current Protocol to the India-Mauritius DTAA, which contains the Principal Goal Check (PPT), represents a transfer by India to align with world efforts towards treaty abuse, notably underneath the BEPS Motion 6 framework. The introduction of the PPT goals to curtail tax avoidance by making certain that treaty advantages are solely granted for transactions with a bona fide function,” stated Rakesh Nangia, Chairman, Nangia Andersen India.
Moreover, the omission of the phrase “for the encouragement of mutual commerce and funding” within the treaty’s preamble suggests a shift in focus in the direction of stopping tax evasion over selling bilateral funding flows. This growth underscores India’s dedication to worldwide tax cooperation requirements whereas elevating important issues for traders leveraging the India-Mauritius hall.
He, nevertheless, famous that the appliance of the PPT to grandfathered investments stays ambiguous, highlighting the necessity for specific steerage from the Central Board of Direct Taxes.
“Given the potential implications for traders, it’s important to watch for any official bulletins or clarifications from the CBDT on this matter. Tax professionals and traders might want to fastidiously analyze the amended DTAA’s textual content and any steerage issued by the Indian authorities to know the total impression of those modifications on their investments and tax planning methods,” he stated.
The Mauritius Cupboard had in February this yr permitted the anti-abuse provisions within the DTAA and so they had been signed by the 2 nations in March. Through the three-day state go to of President Draupadi Murmu to Mauritius in March this yr for delegation-level talks with Prime Minister Pravind Jugnauth of Mauritius, the 2 leaders had witnessed change of 4 agreements together with the protocol to amend the India-Mauritius Double Tax Avoidance Settlement (DTAA) to make it compliant with Base Erosion and Revenue Shifting (BEPS) Minimal Requirements.
The textual content of the protocol has now been made public. The official notifications are anticipated to comply with quickly, specialists stated.
Saurrav Sood, Observe Chief – Worldwide Tax and Switch Pricing at SW India famous that the final modification to the treaty occurred in 2016, the place in capital positive aspects advantages had been taken away from the treaty between India – Mauritius.
On this current modification, India has amended the preamble of the treaty to exclude encouragement to mutual commerce and funding and embody the intention of not offering treaty profit which creates a scenario of decreased taxation or non-taxation. “It is a paradigm shift within the applicability of the treaty provisions to conditions that in any other case had been the idea of deciding in favour of the taxpayer within the judgement of Azadi Bachao Andolan by the Indian Supreme Courtroom,” he stated.
The modification additionally provides in it a brand new Article 27B, which is nothing however a duplicate of the Precept Goal Check which emanates from BEPS Motion Plan 6, Sood additional stated, including that with this Article in place, the invoking of treaty provisions to transactions, which had been designed to learn from grandfathering provisions now additionally comes underneath scanner because the Protocol appears to have a retrospective impact, in contrast to the amendments which had been undertaken in 2016.
“With these modifications in place, one can say that the Authorities of India is expressive in its intention to dissuade tax planning or tax avoidance actions and needs the investments to return to India via dwelling nations straight,” he stated.
