Mauritius has made a strong case for Indian businesses to set up manufacturing or investment companies in the island nation to get easier access to at least 21 African nations...
Mauritius has made a strong case for Indian businesses to set up manufacturing or investment companies in the island nation to get easier access to at least 21 African nations with the same or better tax and fiscal advantages that Mauritius-incorporated firms now enjoy when investing in India. This even as the nation off the southeast coast of the African continent is pressed by India to renegotiate a 32-year-old bilateral double tax avoidance convention (DTACs) seen to be widely abused.
With Mauritius having several DTACs and investor protection agreements with African nations and being part of two regional groupings with them, Indian firms can avail of zero capital gains tax while investing in Africa through Mauritius holding companies, the same way Mauritius companies are not taxed in either of the countries for the capital gains made in India.
The Mauritius leadership is now promoting these fiscal advantages to Indian investors in a big way, which also has a strong persuasive power on India not to make drastic changes in its bilateral DTAC with Mauritius.
To prevent the widely suspected practice of companies shifting tax-evaded funds out of India and subsequently bringing it back in the guise of foreign direct investments of Mauritius-incorporated companies, India had tried several measures but with little success. The latest measure, the introduction of the dreaded General Anti-Avoidance Rules (GAAR), too got postponed till 2017 due to market pressures and would be applicable only to prospective investments.
Many Indian businesses including the Tata Group had meetings with the visiting Mauritius delegation led by Prime Minister Anerood Jugnauth, who inaugurated his country’s Board of Investment Promotion here on Friday to facilitate Indian investors. Companies like State Bank of India, Bank of Baroda, Fortis and Indian Oil Corporation already have a business presence in Mauritius.
Former Mauritius deputy prime minister and two times finance minister and MP Pravind Jugnauth told FE that Prime Minister Narendra Modi, who recently addressed the Mauritius Parliament, had assured that India would not do anything that may harm its treaty partner’s interests.
“We expect that philosophy would continue in our economic relations,” said Jugnauth.
Africa is a huge market with rising purchasing power and Mauritius is the bridge to that market for Indian businesses, explained Jugnauth, adding that goods and services exported from Mauritius to Africa enjoy duty concessions and face no quantitative restrictions.
PM Jugnauth said here that his country was committed to transparency, exchange of information and best international practices in the financial services sector. Mauritius is actively participating in Paris-based think tank OECD’s project aimed at curtailing the aggressive tax avoidance practices of multinational corporations.
If Mauritius and India sign a multilateral agreement being contemplated by OECD and G20 nations, the India-Mauritius DTAC would stand modified to that extent, bringing in a limitation of benefits (safeguard) clause in the treaty aimed at preventing its abuse. That would mean that treaty benefits ? zero capital gains tax in both countries? would be available to only those Mauritius companies that have invested a specified minimum amount locally, not to shell companies. The PM also said that he was committed to making all efforts to ensure that Mauritius was a clean and trusted jurisdiction.
The island nation is part of the Southern African Development Community and Common Market for Eastern and Southern Africa.