India has made a request to Mauritius to rework the three-decade-old taxation treaty that spares FIIs routing their investments through Mauritius, hence misused by many Indian and multinational companies to avoid paying tax or to route illicit funds.
Capital gains is exempted from tax in Mauritius, and under the DTAA, a Mauritian company cannot be taxed in India. India has been insisting on a review of the treaty since 2006 to tighten registration norms for its companies. However, there has been no results since then.
The Finance Secretary has also confirmed that Mauritius has agreed to participate in a joint working group. They have also sent the agenda for discussion. The implication might be that India will push for imposing capital gains tax on Mauritius residents on the sale of Indian shares.
Source: The Economic Times
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