There has been no headway in the Indo-Mauritius talks on the double taxation avoidance agreement (DTAA) as of yet. Government sources indicate that Mauritius is unwilling to allow taxation of capital gains as it feels the move will impact the country's economy, reports CNBC-TV18's Akaansha Sethi.
India was keen that investment from Mauritius be subject to capital gains tax because there was a lot of round-tripping. Companies were setting up subsidiaries in Mauritius and bringing in investment via that route. Since a large chunk of investment comes via Mauritius, the government was keen that this should be subject to capital gains tax.
However, the Mauritius government is not keen on this at all and there has been no headway to the negotiations that have been going on through the month of December. The government is now working on an alternate strategy for this, which is introducing General Anti Avoidance Rules (GAAR) in this Budget itself instead of the direct tax code (DTC). Along with that, they are thinking of removing the residency circular which certifies that the company is resident in Mauritius and hence is not subject to the tax.
So they are thinking of both those steps and as well as offering some compensation to Mauritius remains to be seen it actually go ahead and take the step in the forthcoming Budget itself.
