Earlier this year, India and Mauritius signed a Protocol amending the double-taxation avoidance agreement signed between the two countries. This updated agreement aims to further streamline tax regulations and improve fiscal transparency, aligning with global tax standards.

The proposed updates to the India-Mauritius tax treaty include two significant changes:

i) Revised Preamble: The Preamble will be modified to clearly specify that the treaty aims to prevent double taxation without allowing for non-taxation or reduced taxation opportunities, especially through practices like tax evasion or avoidance, including treaty shopping.

ii) Introduction of principal purpose test: A principal purpose test will be added, aligning with the Multilateral Instrument (MLI) provisions set forth by the Organisation for Economic Co-operation and Development (OECD).

The Protocol to the India-Mauritius tax treaty introduces significant changes, especially given Mauritius's role in facilitating foreign investment into India. Key concerns include ambiguity about whether the Protocol will apply retrospectively or only prospectively. The Indian tax authority has indicated that these concerns will be addressed once the Protocol is in force.