Disagreements between India and Mauritius on trade agreement

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India-Mauritius trade agreementThe Indian government put on hold negotiations with Mauritius on trade liberalization through the comprehensive economic cooperation and partnership agreement (CECPA). The reason is that the Indian government wants to have a revision of double tax agreement (DTA) for treatment of capital gains. Mauritius is keen to sign CECPA with India and become a main recipient for foreign direct investments (FDI) of Indian businessman in Africa. Mauritius has benefited in past when Indian businessmen re-invested in India through Mauritius due to favourable terms and conditions of DTA signed between Mauritius and India. This approach is common in international tax planning. We know that Singapore is the third biggest investor in India. We can also mention that Russian businessmen are using Cyprus to re-invest in Russia. Normally, a low tax jurisdiction with extensive DTA network is used as an investment venue in a country. This approach provides two benefits; making easy a repatriation of earned profit through reduced withholding tax and hiding the identity of local businessmen from the local tax authorities. In some cases, FDI are protected by FDI protection agreements.