by Deepak Shenoy, Capital Mind Mauritius based entities that Invest in India – from Private Equity investors, VC funds, and investment pass-through vehicles (which issue participatory notes) will start to see taxation apply to them from April 1, 2017. This is due to a treaty change between India and Mauritius. Here’s the full text of the treaty change. How it used to work Currently, if you are a foreign investor, you can invest in Indian companies – both listed and unlisted. When you sell them, you would pay capital gains taxes in India (as many NRIs do) and some of those gains are withheld before you get the money. But till now, there were Double Taxation Avoidance Agreements (DTAAs) which are treaties between India and certain countries, that allowed a certain type of gain – Capital Gain on the sale of shares or property – to be untaxed in India. This applied to entities coming from Mauritius, Cyprus and Singapore. So if you brought the money in “through” a Singapore, Mauritius and Cyprus entity, then the sale of shares would not be taxed at all, since none of these countries charged any capital gains taxes. Leave Cyprus out of it for now. The government there tried to remove money from bank accounts and will suffer from investor fear for a while. Mauritius was the easiest. All you had to do to get zero tax on your investments – both listed and unlisted – was simply to set up a shell…
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