FPIs in Mauritius to face greater scrutiny after tax treaty revision

Legal experts divided on whether grandfathering will be available for investments before April 2017

Foreign portfolio investors (FPIs) from Mauritius may face higher scrutiny after the amendment in the India-Mauritius tax treaty introduced a principle purpose test (PPT) to prevent treaty abuse by taxpayers.

The Mauritius government had in February decided to amend the double taxation avoidance agreement (DTAA) with India to align with the Organisation for Economic Co-operation and Development’s proposal on base erosion and profit shifting.

Although the agreement between India and Mauritius was signed on March 7, the protocol of the amendment was made public for the first time on Wednesday, said legal experts.

The norms are yet to be notified by the Indian