Mauritius to amend DTAA with India
anti-abuse provisions under the India-Mauritius tax treaty, the Mauritius Cabinet on Monday decided to amend the agreement to comply with the minimum standards of multilateral instrument (MLI) under Base Erosion and Profit Shifting (BEPS) rules.
The amendment, which is in sync with the ongoing global tax agreement, will discourage existing source-based tax exemptions claimed by the companies and will make it difficult for them to abuse the tax treaty purely for treaty shopping. The Base Erosion and Profit Shifting rules under 'pillar two' model are crafted to ensure large MNCs pay a minimum level of tax on income arising in each jurisdiction they operate in.
The BEPS MLI includes a provision to decline the shelter of a Double Taxation Avoidance Agreement (if the DTAA is covered by the MLI) if the principal purpose of a business arrangement is to save tax. It is gauged by using a Principal Purpose Test, which is a minimum standard under MLI. India and Mauritius are signatories of MLI, however so far Mauritius had not included its DTAA with India within the scope of its MLI compliance.
«By adhering to BEPS MLI framework DTAA benefits can be denied if the business arrangement is done purely for the purpose of avoidance of tax,» a senior tax official told ET.
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