In a previous edition of our newsletter, we informed our readers that a protocol amending the India-Mauritius DTAA was signed by both Contracting States on 10th May 2016 (the “Protocol").

The Protocol has now been ratified and is effective as from 19th July 2016.

As a reminder, the key change brought about by the Protocol is the amendment to Article 13 “Capital Gains" whereby the taxing rights on capital gains (CG) will lie with India as from 1st April 2017.

In order to preserve the position of existing investors, a phase-wise approach has been proposed for the shift from the residence-based taxation to the source-based taxation, through the implementation of:

(i) a grandfathering provision for investments acquired prior to 1st April 2017; and
(ii) a 2-year transition period from 1st April 2017 to 31st March 2019 when Mauritian companies will benefit from a reduced tax rate on CG subject to meeting the conditions of a newly introduced “Limitation of Benefits" clause.

The other salient change was made to Article 11 of the DTAA with the introduction of withholding tax of 7.5% on the interest arising on debt claims/loans made by Mauritian resident banks to Indian companies after 31st March 2017.

In case you missed our newsletter on the Protocol, you can access it here