No headway in tax avoidance agreement with Mauritius

The Finance Minister Mr. P. Chidambaram today clarified that there has been no headway in the talks on tax avoidance agreement with Mauritius.  The discussion process with the island nation has been under way for quite some time, however, no real progress has been seen till date.

The Joint Working Group (JWG), which had been constituted in 2006  was to put in place adequate measures to prevent misuse the Double Taxation Avoidance Convention (DTAC) which has been in force for 30 years now.

The JWG has undergone 8 rounds of talks so far and another round is scheduled in the month on February / March. The Mauritian delegation is expected to visit India for further discussion. The Indian delegation is most likely going to press for major changes in the treaty. The team is insisting on sharing of information regarding source based taxation of capital gains, with the Indian tax authorities.

The Government is also going to pitch for the incorporation of the benefit limitation clauses within the agreement. This is for preventing ‘treaty abuse’.

The DTAC was notified in 1983 and it provides for taxation of capital gains in the country of residence of the investor only.

Commerce and Industry Minister Anand Sharma has a meeting with Mauritian Prime Minister Mr. Navinchandra Ramgoolam at Port Louis last week. He expressed hope that both the nations would be now move forward on this issue at the next JWG meeting scheduled in this quarter. Incidentally, Mauritius accounted for approximately 38% FDI inflows in India between April 2000 – 2012.

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