Mauritius has agreed to negotiate and revise the existing Double Taxation Avoidance Agreement (DTAA) with India and the two sides are expected to meet soon to work out the details, Central Board of Direct Taxes ( CBDT) chairman Prakash Chandra said here on Saturday. He said India has been seeking to tax capital gains on companies making profit in India.
More than 40% of total foreign direct investments (FDIs) to India originate from Mauritius. Authorities here suspect most of these investments are nothing but treaty shopping to avoid paying tax. Capital gains is exempted from tax in Mauritius, and under the DTAA, a Mauritian company cannot be taxed in India. The government has been under pressure to act against tax havens, especially after the civil society and opposition parties slammed theUPA for its failure to tackle the issue of black money and tax evasion. The two countries had first started negotiations on revising the DTAA in 2006 on India's insistence. A joint working group was set up, but the talks were stalled in 2008 as Mauritius was not ready to allow India to tax capital gains at source. India has been insisting on taxing all gains made by a Mauritian company here.
India has DTAAs with 79 countries and is in the process of negotiating more such agreements to broaden the information sharing mechanism. To give more teeth to its tax laws and bring tax evaders to book, the government has devised a Tax Information Exchange Agreement (TIEA) which is being negotiated with 22 identified tax havens. The finance ministry has been negotiating fresh tax treaties with countries with which it has no such arrangement and revising existing treaties where liberal clauses are replaced with more stringent reporting mechanism to avoid any round tripping.
Source: Times of India
Vivek Agrawal
Summer Intern-Fundamental Analysis
DENIP Consultants Pvt. Ltd.
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