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April 2008

India, Mauritius in talks to counter treaty shopping

By Raman Jokhakar, Tarunkumar Singhal, Chartered Accountants
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New Page 4

3. India, Mauritius in talks to counter treaty shopping


India has kicked off talks with Mauritius to rework a 25-year
tax-treaty that spares FIIs based in that country from paying capital gains tax
on sale of shares of Indian companies. Indian revenue authorities have proposed
a ‘source-based’ taxation regime on capital gains made from sale of shares.
India wants Mauritius-based residents and FIIs to pay a tax on capital gains
here if they make profits by selling Indian shares.

However, the proposed tax treatment will apply only on future
investments in equities. Past investments will be spared. It will come into
force only after the two governments arrive at a consensus on the issue and
agree to revise the treaty. However, it is not yet clear whether Mauritius has
agreed to renegotiate the treaty.

(Source : The Economic Times, 15-2-2008)

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