Not Singapore or Mauritius: Paris is the new tax haven for FPIs
Global financial giant Citi has drawn financial ministry officials’ attention that foreign funds and global banks are taking advantage of India’s treaty with France by using Paris as a base for investments in India to escape tax, reports the Economic Times.
Foreign funds and global banks may be taking advantage of India’s treaty with France by using Paris as a base for investments in India in order to escape tax.
A report in the Economic Times says that global financial giant Citi has brought to Finance Ministry officials’ notice that some foreign investors keen to invest in Indian derivatives and stocks are taking this route.
The development comes to light after the Indian government took several steps to tighten tax treaties with Mauritius and Singapore, previously a hotspot for foreign portfolio investors (FPI) using loopholes to avoid paying tax.
Under the revised India-Mauritius and India-Singapore tax treaties allows the government of India the right to tax capital gains at 7.5 percent on short-term capital gains on transfer of Indian shares after April 1, 2017 for two years and 15 percent subsequently.
On the other hand, the India-France treaty has nil tax provision on short term capital gains on equity.
India has double taxation avoidance treaties with European countries such as France, Spain, Sweden and the Netherlands.Banks based out France offer participatory notes (P-Notes) to clients with written guarantee that their investment would not be taxed in India.