New format of Tax Residency certificate proposed by the Govt. of Mauritius

The government of Mauritius is likely to issue a new format for the tax residency certificate (TRC) for foreign institutional investors (FIIs), incorporating additional particulars required by the Indian government. The Mauritian revenue authority is expected to include three crucial details asked by the government for investors availing themselves of treaty benefits. A draft format is likely to be published soon.

The new format proposed by the Mauritian government and circulated among tax experts in India includes details such as address of the assessee, his/her tax identification number (TIN) and the status of the entity as to whether it is an individual, partnership or a company. Entities issued TRCs already might have to get those reissued under the new format, officials said. Earlier this year, through the Finance Act, 2012, the government had amended sections 90 and 90(A) of the Income Tax Act to make it mandatory for investors claiming treaty benefits under different DTAAs to share certain particulars.
In September, the government published rules that laid down these specific particulars required to be furnished by investors claiming treaty benefits. While each country which has aDTAA has to make these changes to its TRC format, Mauritius is key as a significant amount of foreign flows into India come through that country.

The move will impact all foreign investors, including FIIs, investing in India through the Mauritius route. It will also lead to greater transparency and help in better identification of ultimate beneficiaries of these investments. India and Mauritius are signatories to a double taxation avoidance agreement (DTAA) which says capital gains made on investments in India can only be taxed in the island nation. But Mauritius does not levy any tax, making it an attractive destination to route investments to India.

Concerns have been raised in the past about Indian black money, especially from politically connected people, being round-tripped through the FII route. The proposed changes in the TRC format are likely to help identify the source of funds as closely as possible, say tax experts. MORE TRANSPARENCY

|Finance Act, 2012 says only entities that share requisite details eligible for treaty benefits |Mauritius is the largest treaty country, with over 25% of FII assets |Existing Mauritius TRC form does not give key details |Union government releases list of particulars required |Mauritius revenue authority to release proposed TRC format, including address, TIN and status Changed format to help better identification of end-beneficiaries of foreign investments

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