The Financial Services Commission of the government of Mauritius has imposed new set of rules on the companies based in the country for investing in India.

Some have raised concerns that regarding round-tripping of funds and the nation is being used to evade tax. Vice-PM of Mauritius Rama SITHANEN however dismissed those allegations and said “There are concerns and we are addressing them. Mauritius is not a tax haven.”

The government also warned that if entities who invest India, also get involved in sourcing funds then they could loose their license. The Financial Services Commission has a annual audit of those entities which invest in India, mandatory.

Some have accused that Indian corporate are using the country to evade the capital gains tax as Mauritius has signed a double tax avoidance agreement (DTAA) with India. Mauritius is the top source of FDI into India, it accounted for nearly $8 billion of the $18 billion FDI total that went into India in the first nine months of the current financial year.

The Mauritius authorities praised the efforts on the Indian side to check round-tripping. The move comes at a time when the government is planning to review all double taxation avoidance treaties in order to correct deficiencies.

A new direct taxes code is expected to replace I-T Act next year and will bring many changes to the tax laws.

SITHANEN said the FDI flow is not only because of tax benefits as many other countries have signed similar tax treaties with India but Mauritius is preferred due its ‘transparent regulatory system and a sound financial sector’.

SITHANEN further said that the two countries have formed a joint working group to discuss the ways to improve information sharing mechanisms.

The Mauritius government is also planning to attract Indian investment offering a base to launch into the African markets. The authorities want to attract Indian investments in the areas of tourism, hospitality, education, ICT, BPO and renewable energy.