After a gap of three years, India and Mauritius will soon be sitting across the table seeking to revise the Double Taxation Avoidance Agreement (DTAA) for sharing banking and tax-related information more effectively.
?We are considering dates for the next meeting of the joint working group and this would be before the end of the year,? Mauritius? ministry of finance and economic development said, replying to FE queries. It said discussions in the JWG meetings of the two countries have always revolved around the DTAA. ?For the coming JWG meeting, the Indian side has proposed some elements for inclusion in the draft agenda and we are currently working on our proposal,? the ministry said.
India wants that any company based in Mauritius and operating in India should pay tax on the capital gains they make here. It suspects that Mauritius route is misused by investors from third countries and also by many Indians firms to reinvest in India.
Recently, India and Mauritius agreed to review the operations of the JWG, which was set up in 2006 to strengthen the mechanism for exchange of information under the India-Mauritius tax treaty, besides putting in place adequate safeguards to prevent misuse of the DTAA between them, which is in effect from 1983. The talks of revising DTAA were stalled in 2008 as Mauritius was not willing to allow India to tax capital gains at source.
However, on the contrary Mauritius argues that the existing provisions provide for exchange of banking and other tax-related information between the two countries to deal with the menace. In the last three years, Mauritius had received around 64 requests for bank information from India and the requested information was duly submitted.
?It should be noted that the Mauritius-India DTAC is fully in conformity with the agreed international standards. Whilst it does not contain paragraphs 4 and 5 of Article 26 (which deals with sharing information) of the OECD Model Tax Convention, this has not deterred the Mauritius side from providing relevant information when requested,? Mauritius said.
Indian agencies are said to have increased vigilance after they noticed a significant surge in VC fund flow from Mauritius in sectors like telecom and real estate. Mauritius accounts for about 42% or $54.22 billion of the total $130 billion worth of FDI in the country since April 2000.