Mauritius-based funds investing in India get a tax breather. They have now been virtually exempt from the indirect transfer provisions of the income tax law, popularly known as Vodafone tax.
The Finance Ministry has now specified ‘Mauritius’ as an eligible country for its funds to be registered with SEBI as category-I foreign portfolio investor. The Budget had exempted category-I foreign portfolio investor from the ambit of indirect transfer provisions under income tax law.
This move will benefit both regulated and unregulated funds domiciled in Mauritius, say tax experts. Till now, Mauritius funds could not register as category-I FPI as the country was not a member of the Financial Action Task Force (FATF) nor had India specifically recognised Mauritius for this purpose, they said.
Reduce tax outgo
Amit Maheshwari, Partner, AKM Global said, “What will happen is that funds looking to restructure and locate to other jurisdictions due to this would not leave Mauritius. Also, Mauritius funds can now breathe easy as this will reduce their tax outgo significantly.”
Karan Mitroo, Partner, L& L Partners, said: “Pursuant to the SEBI circular last week, stating that even the funds coming from those countries which are non-FATF-complaint may obtain category-1 FPI licence if approved by the Centre, Mauritius has been notified as an eligible country. The amendment will certainly help expand the list of countries which would be eligible for a category-I FPI licence and thus lead to higher investment in India”.
Shagoofa Rashid Khan, Partner and HEad Funds, Investment and Advisory, Cyril Amarchand Mangaldas, “The DEA order reinstates eligibility of Mauritius-registered FPIs for category-I status and stems once again from strong relationship between India and Mauritius. This order restores confidence in Mauritius as a structural option for funds”.
Source: Business Line