DTAA amendment with Mauritius
Q. Recently an amendment was signed to the Agreement of Avoidance of Double Taxation (DTAA) with Mauritius. Which of the following is true regarding it?
1) Offshore funds’ gains will be taxed as capital gains.
2) India gets the right to tax capital gains on investments routed through Mauritius.- Published on 25 May 16a. Only 1
b. Only 2
c. Both 1 and 2
d. Neither 1 nor 2
ANSWER: Both 1 and 2
- The amendment to the Double Taxation Avoidance Treaty with Mauritius will push offshore fund management companies to set up shop in India.
- Under the new safe harbour rules, offshore funds’ gains will be taxed as capital gains than as business income. This will require them to reconfigure their plans.
- Under the amended treaty signed with the island nation, India gets the right to tax capital gains on investments routed through Mauritius. The amendment to the 1983 treaty will come into force from April 1, 2017.
- Although the actual language of the protocol has not been made available, the statement indicates its applicability only to shares. Therefore, the extent of its applicability to hybrid instruments is still open, and they could technically walk away with residence-based taxation protections.
