India will extend a $500 million Line of Credit to Mauritius and strengthen maritime cooperation with the Indian Ocean island nation, whose population predominantly people of Indian origin.
The agreement between the two countries was signed on Saturday in the presence of Prime Minister Narendra Modi and Mauritius Prime Minister Pravind Kumar Jugnauth, who is on a three-day visit to India, his first after assuming office in January.
"A strong developmental partnership with Mauritius is a hallmark of our engagement. The agreement today on a 500 million US dollars Line of Credit from India to Mauritius is a good example of our strong and continuing commitment towards the development of Mauritius. It will also help in the implementation of priority projects," Modi said in a statement.
The two leaders held talks on a wide range of subjects including maritime cooperation. "As frontline states of the Indian Ocean, Prime Minister Jugnauth and I agree that it is our responsibility to ensure collective maritime security around our coasts and in our EEZs," Modi said.
On Friday, Jugnauth had said that the two countries are close to finalising the Comprehensive Economic Cooperation and Partnership Agreement (CECPA) to boost bilateral trade that currently stands at around $2 billion.
"The CECPA negotiations build on the DTAA signed by our countries in 2016, which will give certainty to mutual investments," Jugnauth said at a business meeting organised by industry chambers CII, Ficci and Assocham in Delhi, according to news agency IANS.
Cumulative FDI inflows from Mauritius into India stood at $111 billion as of March 31, 2017, accounting for almost 34 percent of the total inflows, according to India's commerce ministry.
India is Mauritius' second-largest trading partner, after the European Union. Another noteworthy matter is that about 70 percent of the country's people are of Indian-origin, according to India's Ministry of External Affairs.
Trade profile
Mauritius imports manufactured goods, capital goods, foodstuffs, oil and chemical products from India, the European Union, China, South Africa and Australia while the country's exports include clothing, textiles, sugar, cut flowers, molasses and fish, according to a portal supported by the Ministry of Foreign Affairs, Regional Integration and International Trade of Mauritius.
In 2015, merchandise exports stood at $2,457 million, almost half of the country's imports of $4,792 million, the portal said, citing WTO and World Bank statistics.
Amendment to tax avoidance treaty
The two countries signed an agreement to amend the Double Tax Avoidance Agreement (DTAA) in May last year, enabling India to levy tax on capital gains from sale or transfer of shares of an Indian company purchased by a Mauritian tax resident.
"The Protocol (for amendment of the Convention for the Avoidance of Double Taxation) will tackle the long pending issues of treaty abuse and round tripping of funds attributed to the India-Mauritius treaty, curb revenue loss, prevent double non-taxation, streamline the flow of investment and stimulate the flow of exchange of information between India and Mauritius," the government said in a statement on May 10, 2016.
The levy will be in two stages — shares acquired between April 1, 2017 and March 31, 2019 will attract capital gains tax at 50 percent discount to the domestic tax rate (7.5 percent for listed equities and 20 percent for unlisted). From April 1, 2019, capital gains on such sale or transfer will be taxed at the full domestic rates.
