Investment into India is set for considerable changes after recent international treaty changes. India’s 34-year-old tax treaty with Mauritius has been amended in a significant way such that India has begun imposing capital gains tax on investments in shares through Mauritius from April 2017 onwards.  This spells the end of the road for the so-called ‘Mauritius route’, so will investment move to other jurisdictions?

The Mauritius route has been immensely popular over the past three decades for international investment into Indian companies because it effectively enabled completely tax-exempt investment into India. This, combined with several other benefits, made Mauritius the default domicile for routing investments into India. With these opportunities no longer available, investors are likely to seek other routes into India.

Singapore

Traditionally, Singapore would be the first port of call if Mauritius wasn’t an option, but this is no longer necessarily the case. The recent amendments affecting Mauritius will also apply to Singapore since, unusually, the capital gains tax rules under the tax treaty between Singapore and India are linked with those under the India-Mauritius tax treaty.

Malta

Despite its distance from India, Malta is well positioned to become the domicile of choice for structuring inward investment into India. The Mediterranean jurisdiction offers 100% participation tax exemption on dividends and capital gains derived from a qualifying shareholding in an Indian subsidiary. The double taxation treaty between Malta and India of 2013 also enables the reduction of withholding taxes on dividends paid to a Maltese holding company, generally from 20% down to 10%.  Coupled with the fact that Malta imposes no withholding taxes whatsoever on outbound dividends, interest and royalties, it provides an attractive set of benefits to a would-be investor. For those looking for a compliant ‘onshore’ jurisdiction or particularly access into the EU market, Malta’s EU membership would make it the obvious choice.

Dubai

Another jurisdiction which may be increasingly used instead of Mauritius is the UAE, which also has a long-standing tax treaty with India. In addition to a variety of tax benefits, Dubai also offers easier transport links and a smaller time difference to India, which is why it has already become a popular hub for the structuring of Indian private wealth.

Boston Multi Family Office has offices in Malta and Dubai and is well positioned to provide support for individuals and companies looking to invest in India. Please do get in touch using my details above if you would like to discuss your options.

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