The government on Monday notified Mauritius as an "eligible country", enabling its investment entities to register as Category-I foreign portfolio investors (FPIs) with lower KYC requirements.
Category-I FPIs include government and government-related investors such as central banks, sovereign wealth funds, international or multilateral organizations or agencies, including entities controlled or at least 75 per cent directly or indirectly owned by such government and government related investor, pension and university funds.
"The Central government hereby specifies Mauritius as an eligible country for the purposes of Regulation 5 (a)(iv) of the SEBI (Foreign Portfolio Investors) Regulation 2019," an order issued by the Finance Ministry said.
Under the regulation, even the unregulated funds whose investment manager is appropriately regulated and registered as a category-I FPIs provided that the investment manager undertakes the responsibility of all the acts of commission or omission of such unregulated fund.
It also specified that the category-I FPIs shall include entities from the Financial Action Task Force (FATF) member countries or from any Country specified by the Central government by an order or by way of an agreement or treaty with other sovereign governments, which are appropriately regulated funds.
Commenting on the order of the ministry, Amit Maheshwari, Partner AKM Global said due to the recent budget announcement, the exemption from indirect transfers was provided to FPI Category - 1 investors. Mauritius not being a Financial Action Task Force member country was not eligible to come under the FPI category-1.
Through this order from the ministry, he said, funds from Mauritius have been allowed to be registered as Category-1 and hence would get the benefit from indirect transfer provisions under the Income-tax Act, 1961.
Considering the size of investment in Indian capital market by overseas entities from Mauritius, this is a welcome move and goes in line with protection of the FPIs from such adversaries, Taxmann DGM Rachit Sharma said.
Khaitan & Co Partner Atul Pandey said, Mauritius-based funds can now apply for Category-I licence, thereby having lower KYC requirements.
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