Double Tax Agreement Mauritius India: Understanding the Basics
The Double Taxation Avoidance Agreement (DTAA) is a treaty between two countries that aims to prevent double taxation of income. India has a DTAA with Mauritius, which is a small island nation located in the Indian Ocean. This agreement has significant implications for Indian businesses investing in Mauritius and vice versa.
The purpose of this article is to provide a basic understanding of the Double Tax Agreement Mauritius India.
Background
India and Mauritius entered into a Double Taxation Avoidance Agreement in 1982. The agreement was signed to promote trade and investment between the two countries. The main objective of the agreement was to prevent double taxation of income earned by residents of one country in the other country.
The agreement was revised in 2016, and the new agreement came into effect in 2017. The revised agreement has some significant changes that impact Indian businesses investing in Mauritius and vice versa.
Key Provisions of the Agreement
The Double Taxation Avoidance Agreement Mauritius India has several key provisions. The following are some of the most important ones:
1. Residence: The agreement defines “residence” for the purpose of taxation. A person or company is considered a resident of a country if they are liable to tax in that country based on their domicile or place of incorporation.
2. Taxation of Business Income: Business income is taxed in the country where it is earned. For instance, if an Indian company earns income from its business operations in Mauritius, it will be taxed in Mauritius.
3. Taxation of Capital Gains: The taxation of capital gains is one of the most significant changes in the revised agreement. Under the old agreement, capital gains from the sale of shares of an Indian company by a Mauritian resident were exempt from capital gains tax in India. The revised agreement states that capital gains arising from the sale of shares of an Indian resident company will be taxed in India. However, capital gains from the sale of shares of an Indian company held by a Mauritian resident for more than 24 months before the date of sale will be taxed at a reduced rate of 50% of the applicable tax rate in India.
4. Dividends: Dividends paid by an Indian company to a Mauritian resident are taxed at a reduced rate of 5%. Dividends received by an Indian resident from a Mauritius resident company are taxed at the applicable tax rate in India.
5. Royalties and Interest: Royalties and interest paid to a Mauritian resident are taxed at a reduced rate of 15%. Royalties and interest received by an Indian resident from a Mauritius resident are taxed at the applicable tax rate in India.
Conclusion
The Double Taxation Avoidance Agreement Mauritius India is an essential agreement that impacts Indian businesses investing in Mauritius and vice versa. The revised agreement has significant changes that businesses need to be aware of to avoid any tax compliance issues. Businesses should consult with tax experts to ensure they comply with the provisions of the agreement.