Mauritius has agreed to include a ‘limitation of benefits (LoB)’ clause in its revised tax treaty with India.
While specific details of this clause in the India-Mauritius tax treaty are being ironed out, LoB clauses are typically aimed at preventing ‘treaty shopping’ or inappropriate use of tax pacts by third-country investors.
The LoB clause limits treaty benefits to those who meet certain conditions, including those related to business, residency and investment commitments of the entity seeking benefit of a Double Taxation Avoidance Agreement (DTAA).
“Mauritius and India have agreed on the principle of including a limitation of benefits (LoB) clause in the treaty,” the island nation’s Financial Services Commission (FSC) Chairman Marc Hein told PTI.
The FSC is Mauritius’ integrated regulator for global business companies and non-banking financial services sector.
“This LoB clause will have the effect of bringing even more substance to companies which want to be tax resident in Mauritius,” said Mr. Hein, who was here to participate in an international taxation conference.
He added that “there is already a mechanism to prevent misuse, and the further obligations should alleviate the fears of the Indian authorities.’’