The Government of Mauritius has gone in for a thorough review of its tax system, which is aimed at the rationalization of the fiscal incentives. The country’s Finance Minister in his budget speech disclosed this and he also said that the Government would be getting technical assistance from international institutions in making a complete and thorough analysis of its tax system and the rationalization of the fiscal incentive regime.
This particular decision is of particular interest to India since huge investments are routed into the country’s stock market by foreign institutional investors through Mauritius and this is done to make use of the tax benefit. As on now the taxation agreement between the two nations says that capital gains is taxable in the resident country and in this case the country is Mauritius. Earlier, Mauritius had promised OECD to get rid of the harmful tax practices by the year 2005 including that of tax incentives availability to foreigners the same of which are not offered to the domestic companies.
The Mauritius Government made a beginning when it approved imposition of 15 per cent uniform tax on offshore companies registered before July 1, 1998 and this was disclosed in the 2000-01 budget. Before this offshore companies could opt for a rate between 0 and 35 per cent. The other notable act of the Mauritius Government was foreign tax credit for the funds registered in the country after June 30,1998 and paying a flat rate of 15 per cent, was brought down to 80 per cent from 90 per cent and this is regarded as the first step in the phase out operations. The Mauritius Government appears very keen to get rid of the harmful tax practices.
The Indian Government is likely to ask Mauritius for an amendment of the double tax agreement to make capital gains of the foreign companies registered in Mauritius, taxable in India. |
 |
| |
|
|
|
