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IVCA had said the move to treat all income from Indian AIFs as dividends would wreak havoc on funds with a presence in Mauritius and investments in India
The Mauritius Revenue Authority (MRA) has clarified that foreign entities based in the island country need not pay additional capital gains tax following representations from private equity firms which have invested in India.
The MRA said in respect to distributions made by foreign fiscally transparent entities to Mauritian residents, it wishes to clarify that income, which is distributed by a foreign fiscally transparent entity, retain its initial character in Mauritius.
"As such, any capital gains eventually distributed by a foreign fiscally transparent entity to a Mauritian resident shall be treated as capital gains and thus, are not subject to income tax in Mauritius," it said in a late evening clarification.
The Indian Venture and Alternate Capital Association (IVCA) had said yesterday that the MRA ruling to tax capital gains from India would fundamentally alter the character of all income arising from Indian alternative investment funds (AIFs) and lead to increased litigation and uncertainty for India-bound investments.
IVCA had said the move to treat all income from Indian AIFs as dividends and not as constituent income flows (dividend, interest or capital gains), will wreak havoc on funds with a presence in Mauritius and investments in India. The MRA clarification will help the Mauritius based PEs to invest in India.