![\"What](\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2024\/04\/What-India-Mauritius-treaty-amendments-mean-for-foreign-investors.webp?resize=542%2C361&ssl=1\")
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News: <\/strong>The India-Mauritius tax treaty amendments have been primarily targeted to curb “treaty shopping,”. This has significant implications for cross-border investment flows between India and Mauritius, particularly given Mauritius’ role as a major source of foreign direct investment (FDI) into India. What India-Mauritius treaty amendments mean for foreign investors ?<\/strong><\/p>\n Purpose of Tax Treaties<\/strong>: Tax treaties play a vital role in defining the tax treatment of incomes arising in one country and accruing to residents of another, impacting international investment dynamics.<\/p>\n Developing Countries’ Strategy<\/strong>: Often, developing countries, like India, cede greater taxing rights in exchange for anticipated higher foreign investments.<\/p>\n Historical Perspective on Treaty Shopping<\/strong>: The Indian Supreme Court, in the Union of India v. Azadi Bachao, once saw treaty shopping as a necessary trade-off for attracting FDI into a developing economy.<\/p>\n The OECD’s Base Erosion and Profit Shifting (BEPS) programme<\/a> aimed to curb the use of low-tax jurisdictions for tax avoidance.<\/p>\n One of the key BEPS reforms was the Multilateral Instrument (MLI). <\/strong>It allowed countries to amend tax treaties to include provisions like the Principal Purpose Test (PPT)<\/strong> to prevent treaty abuse and treaty shopping.<\/p>\n Introduction of Principal Purpose Test (PPT)<\/strong>, designed to deny treaty benefits. The amendment allows Indian tax authorities to deny treaty benefits if the principal purpose of a transaction or arrangement is to obtain those benefits.<\/p>\n Assessment Beyond Residency Certificates<\/strong>: Amendments empower tax authorities to scrutinize the actual purpose behind transactions, moving beyond mere formal documentation like tax residency certificates.<\/p>\n Mauritius accounted for 16% of FDI inflows into India in 2021-22. The reform is expected to impact the composition of investment flows, similar to the effect of 2017 amendments that made the capital gains at source, taxable.<\/p>\n In 2017, General Anti-Avoidance Rule (GAAR)<\/strong> was introduced in Indian tax law in 2017 to respect the spirit of law and prevent abuse, providing a systematic framework to evaluate transactions.<\/p>\n After 2017 GAAR, there was a fear that the tax department may overreach excessively. However, to allay the fear, a panel-based approach to trigger GAAR was operationalized. A similar approach can be implemented for the trigger of this provision.<\/p>\n Implement a Global Minimum Tax. One such proposal is Subject to Tax Rule (STTR),<\/strong> that imposes a top-up tax on low-taxed transactions, attracting tax of less than 9%.<\/p>\n","protected":false},"excerpt":{"rendered":" News: The India-Mauritius tax treaty amendments have been primarily targeted to curb “treaty shopping,”. This has significant implications for cross-border investment flows between India and Mauritius, particularly given Mauritius’ role as a major source of foreign direct investment (FDI) into India. What India-Mauritius treaty amendments mean for foreign investors ? What are Tax Treaties? Purpose… Continue reading What India-Mauritius treaty amendments mean for foreign investors<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":292788,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[212,239],"class_list":["post-292637","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-2","tag-international-relations","entry"],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2024\/04\/What-India-Mauritius-treaty-amendments-mean-for-foreign-investors.webp?fit=1280%2C853&ssl=1","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/292637","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=292637"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/292637\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media\/292788"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=292637"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=292637"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=292637"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}What are Tax Treaties?<\/strong><\/h2>\n
How did the International Tax Law on tax treaties evolve?<\/strong><\/h2>\n
Specific Amendments in the India-Mauritius Treaty<\/strong><\/h2>\n
Implications for Foreign Direct Investment (FDI)<\/strong><\/h2>\n
What should be done?<\/strong><\/h2>\n