India and Mauritius
- India wants Mauritius to amend DTAA but the differences over capital gains tax, especially the definition of ‘enterprise’ and the treatment of ‘shell companies’ are acting as hindrances.
- Article 13 on ‘capital gains’ of the India-Mauritius DTAA provides for taxation of capital gains only in the country of residence of the investor. India proposed to amend the pact to provide the source-based taxation of such capital gains (in this case India) to prevent the misuse of the treaty by shell companies set up by third countries’ corporate entities
- The Mauritius government issues Tax Residency Certificate (TRC) to companies investing from that country into India and those companies could take the benefit of the agreement — by not paying capital gains tax in India. But, India alleges shell companies or post-box companies in Mauritius have burgeoned because of leniency in issuing these TRCs.
