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...As one of those non-tax experts, formerly working in non-tax treaty jurisdictions, the role of the Double Tax Avoidance Treaty in international operations has for me, over 30 or so years, been largely something for others to worry about. Having arrived in Mauritius less than year ago, however, I now find myself immersed in what is probably the single most important facet of the Mauritius offshore industry and have had to embark on a steep learning curve (or should it be called a roller coaster ride!)
I will not take up the readers' time unduly by explaining all of the academic, macro-economic, philosophical and geo-political reasons behind Double Tax Treaties ("DTA's") in general. Suffice it to say, however, that without them, the imposition of taxes in both the home country of the principal and in the place where the income arises, without any relief, would be less than helpful to the success of international trade and undoubtedly would encourage less legitimate means of reducing this particular financial overhead for those involved.
A Little Bit Of History
In the case of the treaty negotiated between India and Mauritius, it seems that what started out in 1983 to be a leg-up for Indian businesses wanting to ply their trade in other countries in the region, soon turned into an ideal (and much larger) vehicle for entrepreneurs from outside India to avoid double taxation upon their investments made into that country. It is arguably due to the genesis of this treaty that it was then, and remains to this day the most advantageous of all of the DTAs with India. That is not to say that there have been no challenges and changes along the way. In 2003 the Indian Government withdrew the ability of Non-Resident Indians to hold their personal portfolios of Indian quoted investments through private Mauritius companies. The 2004 Indian budget withdrew withholdings tax on dividends paid and abolished capital gains tax on certain transactions. But, as we shall see, substantial opportunities still exist.
So, who has been investing in India in recent years? The following table shows the volumes and source of funds of Foreign...
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