The amendments are a result of long-drawn negotiations between the two countries.
India and Mauritius signed a Protocol on May 10 to amend the India-Mauritius double taxation avoidance treaty. The Protocol grants India taxation rights on capital gains that arise from the alienation of shares acquired by Mauritian tax residents in Indian companies on or after April 1, 2017. During the initial two-year transition period from April 1, 2017 to March 31, 2019, only 50% of the applicable tax rate will be levied, provided that the Mauritius entity meets the newly introduced limitation of benefit test. All existing investments up to March 31, 2017 have been grandfathered. The Protocol will also affect the India-Singapore double taxation avoidance treaty because the capital gains benefit under the latter is co-terminus with the capital gains benefit under the India-Mauritius treaty.
Mauritius and Singapore are the two biggest routes for foreign direct investment into India. India’s government has announced that it intends to renegotiate the India-Singapore treaty.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact Morgan Lewis Stamford LLC, a Singapore law corporation affiliated with Morgan Lewis & Bockius LLP.